5-912270 19(1)
Dear 19(1)
We are writing in reply to your letter of August 12, 1991, in which you request an explanation concerning the changes to the RRSP contribution limits for 1991.
Pension reform legislation was announced by the Department of Finance in October 1986 and was passed on June 27, 1990. Effective for the 1991 and subsequent taxation years, an individual may contribute amounts to an RRSP and claim a deduction equal to the lesser of:
1) 18% of the previous year's earned income minus the individual's pension adjustment for the previous year; and
2) the RRSP dollar limit for the year.
As you point out, an individual who has no earned income in the previous year, therefore, cannot claim a deduction for an RRSP contribution.
We enclose a copy of the 1991 Pension and RRSP Tax Guide which explains the legislation in more detail.
We are sorry our reply could not be more favourable. If you wish to obtain clarification of the policy behind the changes to the legislation, we suggest that you write to the Tax Policy Branch of the Department of Finance, L'Esplanade Laurier, 140 O'Connor Street, Ottawa, Ontario, K1A 0G5.
Yours truly,
for DirectorFinancial Industries DivisionRulings Directorate