Subsection 204.2(1.2) - Undeducted RRSP premiums
Roy v. The Queen, 2019 TCC 50 (Informal Procedure)
The taxpayer began the 2006 taxation year with unused RRSP contributions of $1,856. He contributed an additional $43,000 during 2006, resulting in total unused contributions of $44,856. The taxpayer claimed RRSP deductions within the RRSP deduction limits for the 2006 to 2012 years for a total of $21,495. The RRSP excess contributions were invested in securities that quickly became worthless, so that except for the sum of $1,090 withdrawn in 2008, he was unable to withdraw the excess contributions and the RRSP account was eventually closed in March 2012. The taxpayer had not reported his excess contributions by filing a T1‑OVP return. The taxpayer submitted a relief application, which was accepted by the Minister in a letter in 2015 stating that she was satisfied that the “excessive contribution arose due to reasonable error” and that “your excessive contribution has been eliminated”. On that basis, the Minister confirmed the waiver of the tax under Part X.1 of 1% per month, penalties and interest (in the amount of $39,193.08.)
However, the Minister assessed the taxpayer’s 2013, 2014 and 2015 taxation years on the basis that he was not entitled to deduct unused RRSP contributions from prior years in those years (other than $2,000 allowed for 2013). Before finding that the taxpayer was entitled to the claimed deductions, Smith J stated (at paras 18, 20, 21-23):
While paragraph 204.1(1.1)(b) does allow cumulative excess contributions to an RRSP of up to $2,000, the Respondent has not pointed to any statutory provision which allows her to essentially set-off or eliminate unused RRSP contributions on the basis that they represent excess contributions that cannot be withdrawn. The Minister’s remedy appears to be limited to the 1% tax and penalty for failure to file the T1‑OVP form within 90 days from the end of the taxation year.
…[T]here appears to be no basis for the Respondent’s argument in this instance that, having consented to the Appellant’s relief application, the Minister may arbitrarily eliminate unused RRSP contributions.
The Respondent concludes … that it “would be unfair for this Court to allow him to reduce his taxable income in future years while never having paid taxes on the excess contribution as taxable income.” (My Emphasis).
…[T]he Respondent has failed to point to any legislative provision that would allow the Minister to eliminate unused RRSP contributions on the basis that they represent excess contributions.
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|Tax Topics - Income Tax Act - Section 146 - Subsection 146(1) - Unused RRSP Deduction Room||CRA had no authority to eliminate unused RRSP contributions as being excess contributions||146|
7 July 1995 External T.I. 5-951203 -
"A contribution to an RRSP will generally not be considered to have been made until the financial institution to which an amount is sent accepts the amount as a contribution ... [T]he designation of an amount as a contribution can be revoked by the contributor at any time before it is so accepted by the institution."
4 July 1994 T.I. 941444 (C.T.O. "Investment Counsel Fees")
The taxpayer claiming investment counsel fees must be the legal owner, i.e., the RRSP trustee, rather than the annuitant. If the annuitant pays the fees on behalf of the RRSP trust, the payment will be a gift made to the RRSP within the meaning of s. 204.2(1.2)I(b).