| 19(1) | File No. 5-8447 |
| A.B. Adler | |
| (613) 957-8962 |
August 11, 1989
19(1)
This is in reply to your letter dated July 12, 1989 addressed to the Minister's correspondence Unit, and is further to your recent telephone conversation with Allen Adler of this office.
This is to confirm that as a result of the tax Court of Canada decision in the Arthur E. Walton case the interest element of instalment payments made to purchase past service for pension purposes will be treated as an amount contributed to a registered pension plan under paragraph 8(1)(m) or 60(j) of the Income Tax Act (the "Act"). Our new position will be generally applicable to such payments after 1988.
In the case of a retired taxpayer in receipt of pension income throughout 1989, he will be able in 1989 to use paragraph 60(j) of the Act to deduct 1989 pension contributions in excess of the $3,500 limit under paragraph 8(1)(m) of the Act. Under the proposed pension reform legislation paragraph 60(j) will not be available for that purpose in the 1990 and subsequent taxation years. Further, the non-deductible amounts of such instalment interest for 1988 and previous years will be treated as non- deductible amounts of such instalment interest for 1988 and previous years will be treated as non-deducted pension contributions carried forward under subsection 8(8) of the Act, and will be deductible in future years subject to the paragraph 8(1)(m) limit.
Concerning your 1988 taxation year you may qualify for a 1988 deduction in respect of the instalment interest portion of your 1988 past service pension contributions under paragraph 8(1)(m) or 60(j) of the Act provided that you have filled a valid notice of objection for that year, and you otherwise satisfy the requirements of those provisions.
We trust that our comments are sufficient for your purposes.
Yours truly,
for DirectorFinancial Industries DivisionRulings Directorate