| May 18, 1990 | |
| TORONTO DISTRICT OFFICE | HEAD OFFICE |
| Financial Industries Division | |
| Attention: B. MacLean | Maureen Shea-DesRosierss |
| Source Deductions | (613) 957-8953 |
| File No. 7-900683 |
This is in reply to your memorandum of April 18, 1990 addressed to Source Deductions Inquiries, Head Office, which was referred to us for reply. A letter from the 24(1) was attached.
24(1)
24(1)
Revenue Canada's opinion is asked on both matters:
1. In the event a Plan member does not make voluntary repayment, does 24(1) repayment of the contribution that should have been made by the Plan member create a taxable benefit for the Plan member;
2. In the event a Plan member voluntarily repays the contribution shortfall, is this a deductible contribution for the Plan member;
• in the current year 1990 income tax return or
• in prior years income tax returns (i.e. should the 24(1) amend applicable prior year T4 Supplementaries)
• is it not deductible?
Our Comments
In the first situation, the repayment by 24(1) to the Plan, in lieu of the employee, will not constitute a benefit to the employee and will not be included in his income pursuant to subparagraph 6(1)(a)(i) of the Income Tax Act (the "Act").
In the second situation, subparagraph 8(1)(m)(iii) of the Act allows a taxpayer to deduct, in computing his income from an office or employment for a year, contributions made in the year to a registered pension fund or plan in respect of a previous year in which the taxpayer made a contribution to the plan. The maximum amount deductible for 1990 and prior years under subparagraph 8(1)(m)(iii) of the Act is $3,500 less the aggregate of any amounts deducted in the year as current service contributions and past service contributions for years when the taxpayer was not a contributor. Any amount not deductible because of these limitations is carried forward as an excess contribution.
For 1991 and subsequent years, proposed paragraph 147.2(4)(c) in Bill C-52 provides the equivalent deduction to the subparagraph 8(a)(m)(iii) deduction for previous years; that is, the individual will be able to deduct the lesser of the carry forward of the excess contribution and $3,500 less, in either case, the aggregate of current service contributions and past service contributions for years when the individual was not a contributor.
Although we do not have knowledge of the individuals' particular circumstances, we would expect that in most cases they will not be able to deduct any amount paid in respect of the prior service until such time as they no longer make current service contributions because of the limitations noted above.
We trust the above comments will be of assistance to you.
Chief Deferred Income Plans & Trusts SectionFinancial Industries DivisionRulings Directorate