Taylor, J.T.C.C.:-This is an appeal under the informal procedure, heard in Toronto, Ontario on October 31, 1994, against an income tax assessment for the year 1990, in which the respondent denied the claim for a deduction of an amount of $7,500 contributed toward a Registered Retirement Savings Plan (RRSP) — an amount of $3,500 was allowed to the appellant.
The notice of appeal contained the following statement:
My layoff in January 1991 terminated all company benefits (health, pension eligibility, etc.) with only two weeks’ notice, and occurred well in advance of issue of the T-4 statement for 1990.
For the respondent the assumptions were:
— during the 1990 taxation year, the appellant was employed by Chemetics International Company (the "corporation");
- during 1990 the appellant was a member of the corporation pension plan under which he is or may be entitled to benefits;
— the appellant’s RRSP deduction limit for the 1990 taxation year was 20 per cent of earned income, up to a maximum of $3,500.
The respondent submitted that:
...the appellant is not entitled to deduct RRSP contributions from the income in the 1990 taxation year in excess of $3,500 in accordance with provisions of paragraph 146(5)(a) of the Act.
Mr. Corse explained the circumstances of his employment, and agreed that the effective date of his termination was February 14, 1991. He had purchased the RRSP at issue on December 31, 1990, and it was in the amount of $7,500. There was no explanation provided for the purchase of $7,500 on that date in 1990, when he was clearly still employed, and as far as the evidence showed would remain entitled to benefits under the company plan (leaving aside for the moment the two year waiting period), as opposed to only purchasing an amount of $3,500. Mr. Corse submitted a letter from his former employer "Chemetics" - without objection on the part of the respondent — which read:
Re: Pension Adjustment for 1990 T4
In reply to your letter of April 12th, 1993 to C.S.M. Shepherd, in 1990 you were a member of the pension plan.
You were hired on March 29, 1989 and after one year’s waiting period on March 29, 1990 you were enrolled in to the Chemetics pension plan. Therefore you should have had a pension adjustment on your T4 for 1990.
When you terminated employment on February 14, 1991, you had no yet achieved two years in the pension plan for vesting purposes. Therefore you were not entitled to any benefit under the pension plan.
For Revenue Canada’s purposes this letter should explain that at the time the 1990 T4 pension adjustment was completed correctly, but due to your termination of employment in 1991 you were entitled to no benefits.
This was followed by a further letter dated July 29, 1991:
Following our telephone conversation last week, I must admit to misleading you regarding our pension plan and your potential benefit from the plan.
While you became a member of the plan in March 1990 after 12 months’ employment, you needed to be in the plan at least two years to become "vested” and thereby eligible for pension benefit or commuted value. You were not in the plan for two years and therefore will not receive a benefit from the plan. I apologize for my mistake.
I am not familiar with the treatment of the "pension adjustment" figure on your 1990 T-4 with regard to your potential RRSP contribution for 1991 and may I suggest you check with Revenue Canada regarding whether you can ignore the pension adjustment or not.
It was the appellant’s contention that there would have been an amended T-4 slip issued by Chemetics except for the fact that the company had closed down and there were no employee files available, nor management staff to carry that out when he was reassessed by Revenue Canada in 1992.
For the respondent the issue is simple - at the time he was employed (1990) he was a person "who may become entitled to benefits” (see Subparagraph 146(5)(a)(l) of the Act). Further the respondent’s counsel pointed to the case of Zingel v. M.N.R., [1980] C.T.C. 2466, 80 DTC 1424, wherein there are circumstances closely related to this appeal and which concluded at page ??? (D.T.C. 1425):
In my view, it is evident that "in the year" in question the appellant "was a person" who "may" become entitled to benefits under a pension fund or plan. It is just as evident, because of the nature of his work, that the prospect of such benefit was remote indeed, but it did exist, and the Minister is therefore correct in his assessment.
Analysis
If indeed the circumstances of this appeal were identical to those in Zingel, supra, the result should be the same. A critical fact in Zingel was that there remained, even at the date of the appeal hearing, a prospect of some benefits, no matter how slight that prospect, and it therefore could be said that Mr. Zingel "may" become entitled to benefits. Mr. Corse in this appeal was not nor might he become entitled to benefits as at the date he was preparing his income tax return which was March 1, 1991. Zingel, supra, would indicate that the phrase "who is or may become entitled to benefits" refers to the same time frame as that during which the "taxpayer was employed". Mr. Corse, on the other hand, in this appeal contended that the point in time at which that phrase should be related could be the time when the taxpayer was claiming the deduction "in computing the income for a taxation year". I am inclined to see that Mr. Corse has reached the more appropriate view of the portions of the Act under consideration. As of March 1, 1991 according to all the information available in this matter, Mr. Corse neither was, nor could he become, entitled to the benefits under the company plan - he simply had not been employed for two years. It seems to me that faced with that prospect on February 15, 1991 (the day after termination), he could even have gone out and purchased the RRSP in the amount of $7,500, well within the 60 day time limit after the end of the 1990 year. I fail to see in this portion of the Act the procedure by which Mr. Corse can be denied the claim he seeks.
The appeal is allowed.
Appeal allowed.