| 24(1) | 5-901856 |
| M.P. Baldwin | |
| (613) 957-3499 | |
| 19(1) |
October 19, 1990
Dear Madam:
Re: Deductibility of past service pension contributions
This is in respect of your letter of August 3, 1990 in which you requested our views on the deduction of a past service contribution to a defined benefit registered pension plan in respect of years in which the individual was not a contributor to that plan but was a contributor to another registered pension plan.
As indicated in paragraph 23 of our Information Circular No. 70-6R2 we do not provide written opinions on proposed transactions. However, we are prepared to provide you with the following general comments.
1) If the past service payment is made prior to the end of 1990 the payment as described above would be deductible under existing subparagraph 8(1)(m)(ii) and subsection 8(8) of the Income Tax Act. This deduction is described in IT-167R5 which has been enclosed.
2) If the past service payment is made after the end of 1990, the payment as described above would be deductible under the limits specified in subparagraph 147.2(4)(c). The payment would be categorized as such a payment since the taxpayer was a contributor to an RPP in the year in respect of which the contribution was made. The deductible amount under this subparagraph is equal to the lesser of:
(a) the amount of contributions (other than AVC'S, prescribed contributions and past service contributions before 1990 while not a contributor 147.2(4)(b) made by the individual in the year or a previous year in respect of years of service prior to 1990, minus deductions previously claimed in respect of those contributions, and
(b) $3,500 minus the total of amounts deducted for mount of employee's pension contributions deductible for service after 1989 and for service before 1990 while not a contributor under subparagraphs 147.2(4)(a) and 147.2(4)(b) of the Income Tax Act.
3) Commencing in 1989, the full amount of instalment payments, including any instalment interest charge paid to the, pension plan, is considered to be a pension contribution.
We trust that our above comments will be of assistance to you.
Yours truly,
for DirectorFinancial Industries DivisionRulings Directorate