Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
XXXXXXXXXX
Dear XXXXXXXXXX:
I am responding to your letter of August 2, 1995, written on behalf of XXXXXXXXXX concerning his clients who are residents of Canada, who work in the United States and who make contributions to a United States pension plan known as a 401(k) plan.
I would like to explain that employees who participate in a 401(k) plan elect that their employer contribute certain amounts of their employment earnings on their behalf to the plan. As such these contributions are in fact part of their employment earnings. Under the provisions of the Canadian Income Tax Act (the "Act") these employees are required to report their gross earnings from employment which includes their contributions to the 401(k) plan. The Act very specifically sets out which amounts can be deducted, including contributions to pension plans, from employment income for income tax purposes. However, there is no provision in the Act which provides for the deduction of contributions to foreign pensions plans such as the 401(k) plans.
Therefore, the re-assessing action taken by Revenue Canada to include such contributions in employment income for Canadian income tax purposes does not reflect a change in policy but results from the application of the provisions of the Act to the employment income of those clients of XXXXXXXXXX.
I trust that the information provided will assist
XXXXXXXXXX in understanding Revenue Canada's position on this matter.
Yours sincerely, September 15,1995 File # 4-952473