Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
November 3, 1988
SASKATOON DISTRICT OFFICE
Attention: L.C. Pollock Chief of Audit
HEAD OFFICE Financial Industries Division C. Kauppinen (613)957-3495
SUBJECT: XXXX
Subsections 146(5.3), (5.4) and (5.5)
of the Income Tax Act ("Act")
This is in reply to your memorandum dated October 24, 1988 wherein you requested our opinion with respect to the grandfathering provisions of the above-noted subsections of the Act (which are now repealed).
The facts, as we understand them, are as follows:
XXXX
The representative has made the following points to support the allowance of the deduction for the RRSP contribution.
1) The technical notes to Bill C-84 (1985) discuss the continued availability of this deduction after May 23, 1985 for 1984 dispositions resulting in taxable capital gains brought into income through the reserve mechanism in subsection 40(1) of the Act.
2) The grandfathering provisions provide for the continued availability of the deduction for an RRSP contribution with respect to 1984 dispositions after May 23, 1985. This provision does not discuss the reserve mechanism.
3) The "Farm Contribution Limit" is not a limiting factor in this case.
The representative's position contemplates an unlimited time period for RRSP contributions with respect to 1984 disposition of farm property under subsection 146(5.3).
OUR OPINION
In our opinion, the wording of the grandfathering of repealed subsection 146(5.3) of the Act supports the representative's position that a deduction for a contribution to an RRSP is available any time after 1983 in respect of a taxable capital gain realized on a disposition of farm property during the 1984 calendar year. This contribution will be limited to the amount specified in former subsection 146(5.3) prior to its repeal.
If a capital gains reserve is being claimed, a current deduction under subsection 146(5.3) will be limited to the taxable portion of the gain actually recognized in a given year or a prior year less any deduction previously claimed up to the total otherwise allowable under the subsection. However, the fact that no capital gains reserve was claimed for a taxable capital gain from a disposition in 1984 does not preclude the availability of the subsection 146(5.3) deduction in any year or years after 1984 in respect of a qualified farm property disposed of prior to 1985.
Chief Deferred Income Plans & Trusts Section Financial Industries Division Rulings Directorate
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