W.C. Harding (613)957-3499
February 9, 1988
Dear Sirs:
This is in reply to your letter of January 6, 1988 wherein you requested our comments in respect of a particular situation described by you. Specifically, you requested that we confirm that an amount of $3,500 per year is deductible by an individual in accordance with the provisions of paragraph 8(l)(m) of the Income Tax Act (the Act) in respect of contributions made to a registered pension plan in respect of years when the individual was not a contributor to the plan. You further requested that we confirm that the above amount is in addition to the contribution limit in respect of current service and that any amount not deducted in the year paid could be carried forward and deducted in subsequent years.
The particular situation described by you is in respect of an unidentified person and a proposal which, in accordance with its terms would have been completed by December 9, 1987. Accordingly, specific questions on it should be directed to the individual's District Taxation Office.
We can confirm, however, that in general, past service contributions made in respect of years when a person was not a contributor under a plan are, to the extent they were not deductible under paragraph 60(j) of the Act in the preceding year, deductible under subparagraph 8(l)(m)(ii) of the Act and that this deduction is in addition to any claim for current service contributions that may be made under subparagraph 8(1)(m)(i) or paragraph 8(l)(m.l) of the Act.
We can also confirm that any contributions not deductible in the year in which they are paid, may be carried forward as provided in subsection 8(8) of the Act. We must, however, draw your attention to the provisions of clause 8(1)(m)(ii)(B) of the Act in this regard. Under this provision, the maximum total deduction that an individual may make over any number of years under subparagraph 8(l)(m)(ii) is limited to $3,500 multiplied by the number of calendar years during which the individual did not contribute to the plan. For example, if a person has made contributions in respect of 11 calendar years for which she had not contributed, the maximum deduction would be $38,500, deductible at the rate of $3,500 per annum for 11 years.
Past service contributions made in respect of a calendar year during which the individual rendered services while she was a contributor are deductible as provided under subparagraph 8(l)(m)(iii) of the Act.
The Department's publication, Interpretation Bulletin IT-167R5
discusses contributions to a Registered Pension Plan and may be of additional assistance to you.
We hope that this reply is satisfactory.
Yours truly, for Director Financial Industries Division Rulings Directorate