Section 147.2

Subsection 147.2(1) - Pension contributions deductible — employer contributions

See Also

Patons & Baldwins Ltd. v. MNR, 69 DTC 189, [1969] Tax A.B.C. 221

S.11(1)(g) of the pre-1972 Act was found to preclude the deduction of annual contributions to an unregistered pension plan under the general law relating to deductions by commercial enterprises.

Administrative Policy

6 May 1991 T.I. (Tax Window, No. 3, p. 12, ¶1241)

Where a corporation contributes treasury shares, an amount equal to their fair market value would normally be deductible by the corporation.

Subsection 147.2(2) - Employer contributions — defined benefit provisions

Administrative Policy

1996 Ruling 963654 (C.T.O. "Employee of Predecessor")

An employer may take a deduction under s. 147.2(2) with respect to employees of a predecessor employer.

18 June 1992 Internal T.I. 7-921699 -

General discussion.

Subsection 147.2(4) - Amount of employee’s pension contributions deductible

See Also

Smith v. The Queen, 2018 TCC 61 (Informal Procedure)

RPP contribution deductible only from employment income rather than income generally

In his 2015 taxation year, the taxpayer (a status Indian) received $37,800 in exempt employment income from the Tlowitsis‑Mumtagila First Nation, and also had over $100,000 in investment income, which was not exempt under the Indian Act. Miller J confirmed the denial by the Minister of his deduction for $3,213 in registered pension plan ("RPP") contributions which he effectively had sought to deduct from his non-employment income.

Graham J noted (at para. 15) that in his dissenting reasons in Hickman Motors, Iacobucci J had found a “requirement to segregate income according to various sub-sources” (e.g., to distinguish the business income arising from each business, property or employment of a taxpayer) and (at para. 17) that FLSmidth rejected the proposition that “income…from business or property” in s. 20(12) “referred to a single unified source of income or to the income derived from business or property generally.” He also noted (at para. 18) that although the specific deduction provision (s. 147.2(4)) “does not identify a specific source of income,” s. 147.2(4) referenced s. 8(1)(m), which was located in subdivision a and whose “heading indicates that these provisions are restricted to income from an office or employment.” In denying the deduction, he then stated (at para. 20):

[A] taxpayer must calculate income in any taxation year from all sources but it is calculated with reference to each source, which in this appeal, means each office or each employment. The deduction for RPP contributions cannot be treated as a deduction in the general sense so that it could be separated from its income source. The Appellant cannot take the deduction, which is connected to his employment with Tlowitsis-Mumtagila First Nation and apply it generally against his other income of dividends and capital gains interest.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 3 income is to be computed on a “sub-source” basis 99
Tax Topics - Statutory Interpretation - Headings heading provided guidance on the overall framework 221

Administrative Policy

26 November 2013 External T.I. 2013-0498601E5 - Voluntary contribution to U.K. Pension

top-up contribution to UK plan

The resident taxpayer, who had emigrated from the U.K., could not deduct a "top-up" contribution to a U.K. pension plan in determining taxable income for Canadian tax purposes, as contributions to a pension plan are only deductible in computing a Canadian resident's taxable income where the pension plan is registered, and "a U.K. pension plan does not satisfy the definition of a registered pension plan."

21 July 1992 Internal T.I. 5-922117 -

Discussion of situation arising out of a federal government employee going to another employer before the employee has fully paid the cost of buying back past service.

Paragraph 147.2(4)(a) - Service after 1989

Subsection 147.2(8)

Administrative Policy

2015 Ruling 2015-0601441R3 - XXXXXXXXXX Partnership - winding up

s. 147.2 continuity following s. 98(5) wind-up
Current structure

Sub1 and Sub2 (both taxable Canadian corporations and wholly-owned subsidiaries of Parent) are currently the sole partners of a general partnership (“Partnership”). Partnership’s business generates income under s. 12(1)(a) and Partnership claims a reserve under s. 20(1)(m). Partnership is the plan sponsor and a participating employer in connection with each of the Employee Unfunded Benefit Plans. Sub1 was indebted to Partnership under the demand non-interest bearing “Sub1-Partnership Note”), and Parent was indebted to Partnership under the “Parent-Partnership Note,” which was interest bearing and payable on demand.

Proposed transactions
  1. Sub1 will repay the Sub1-Partnership Note by assuming Partnership’s accounts payable.
  2. Sub1 will assume all indebtedness of Partnership, including the Partnership-Parent Note and Partnership’s obligation to pay "Employee Accruals" under various compensation and retirement plans in consideration for additional Partnership Units.
  3. Partnership will pay to Sub1 a reasonable amount for undertaking to assume Partnership’s prepaid revenue obligations (by assigning an equivalent amount of the Parent-Partnership Note as payment), and a joint election will be made under s. 20(24).
  4. Sub2 will transfer its interest in Partnership to Sub1 in consideration for Sub1 Preferred Shares and a non-interest bearing promissory note (the “Sub1 Note”), jointly electing under s. 85(1). As a consequence Partnership will cease to exist, Sub1 will become the sole owner of all the Partnership property and Sub1 will become subject to all the remaining obligations of Partnership, and immediately after the time that Partnership ceased to exist, Sub1 will carry on alone the business that was the business of Partnership.

A former employee of Partnership will be deemed to be a former employee of Sub1 for the purpose of s. 147.2(8) and Partnership will be considered a “predecessor employer” for such purpose, pursuant Reg. 8500(1.2) and the definition of “predecessor employer” in Reg. 8500(1). There may be deducted in computing the income of Sub1 the total of all amounts each of which is a contribution made by Sub1 after the winding-up to a Defined Benefit Pension Plan within the time prescribed in s. 147.2(1).

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 98 - Subsection 98(5) 98(5) wind-up through s. 85 transfer of partnership interest of one partner to the other and preceded by debt assumptions 272
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(c) - Subparagraph 20(1)(c)(ii) interest deductible following assumption of interest-bearing internal debt on s. 98(5) wind-up 279
Tax Topics - Income Tax Act - Section 34.2 - Subsection 34.2(11) continuation of s. 34.2(11) reserve following partnership wind-up 324
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(m) continued availability of s. 20(1)(m) reserve following s. 98(5) wind-up 266
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(n) flow-through of s. 20(1)(n) reserve on s. 98(5) wind-up 262
Tax Topics - Income Tax Act - Section 20 - Subsection 20(24) s. 20(24) election on s. 98(5) wind-up 280
Tax Topics - Income Tax Act - Section 18 - Subsection 18(9) s. 18(9) deduction claimable by transferee former partner following s. 98(5) wind-up 216
Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(i) no income inclusion on assumption on s. 98(5) wind-up of DSUs and RSUs 329
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Salary Deferral Arrangements - Paragraph (k) no income on RSU/DSU assumption 20