This is in reply to your letter written in October, 1990 concerning the calculation of the portion of your 1989 Old Age Security benefits that was required to be repaid upon the filing of your 1989 income tax return. We apologize for the delay encountered in providing you with a response.
In your letter, you noted that the required calculation of the benefit repayment amount included a "grossed-up" amount of dividend income and a taxable capital gain that does not take into account the offsetting capital gains deduction.
24(1)
The relevant provision of the Income Tax Act, as enacted by Parliament, specifically requires that the repayment be determined on the basis of your net income. Consequently, deductions such as the capital gains deduction which appear later, in the calculation of taxable income, as well as the dividend tax credit which appears in the actual calculation of tax payable cannot be used for the purposes of the repayment calculation.
We hope our comments have clarified the Department's position with regard to the required calculation of the Old Age Security benefit repayment.
Yours truly,
for DirectorBusiness and General DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch