ARCHIVED - Contributions to Registered Retirement Savings Plan

What the "Archived Content" notice means for interpretation bulletins

NO: IT-124R6

DATE: January 31, 1995

SUBJECT: INCOME TAX ACT
Contributions to Registered Retirement Savings Plan

REFERENCE: REFERENCE:Subsections 146(5) and (5.1) (also sections 60.01 and 204.1 to 204.3 and the definition of "disposition" in section 54; subsections 104(10.2), (27) and (27.1), 146(1), (2), (3), (6.1), (8.2), (8.21) and (8.3), 146.3(5.1), 147.1(1), 147.3(13.1) and 152(6); and paragraphs 18(11)(b), 20(1)(bb), 40(2)(g), 60(i), (j), (j.1), (l) and (v), and 128(2)(d) of the Income Tax Act; and sections 7800, 8303 and 8304; subsections 8301(1) to (4), (6), (8) and (9), 8307(3), (5), (6) and (7), 8308(2), and 8500(1) and (3) of the Income Tax Regulations)

Contributions to Registered Retirement Savings Plan

This bulletin is under revision to reflect amendments to the Income Tax Act since its date of publication.

Application

This bulletin cancels and replaces Interpretation Bulletin IT-124R5 dated March 7, 1986. The comments in this bulletin reflect amendments to the Income Tax Act and Regulations resulting from Pension Reform. Since many of these amendments became effective for the 1991 and later taxation years, this bulletin applies primarily to taxation years after 1990. For information about the rules that apply to taxation years before 1991, please refer to the law.

Summary

This bulletin discusses the rules for determining the maximum amount a taxpayer can deduct for a year after 1990 for registered retirement savings plan (RRSP) contributions. Generally, a taxpayer's RRSP deduction limit for a year is equal to 18% of the taxpayer's earned income for the previous year (to a maximum amount) minus an amount in respect of benefits that accrued to the taxpayer under registered pension plans (RPPs) and deferred profit sharing plans (DPSPs) for the previous year. The reduction to the RRSP deduction limit to reflect participation in RPPs and DPSPs is intended to provide that all taxpayers have a similar opportunity for tax-assisted retirement savings regardless of differences in their pension arrangements. Also, if a taxpayer contributes less than allowed in a year, the taxpayer may be able to make up for the missed contributions in later years.

This bulletin also discusses the rules governing items such as the tax imposed under Part X.1 of the Act on excess contributions and the deduction allowed for withdrawals of undeducted contributions. Explanations of certain terms used throughout this bulletin are provided in the Glossary at the end.

The subject matter of this bulletin is arranged under the following headings:

• General Comments
• Interest Expense and Administration Fees
• Contributions to the Taxpayer's RRSP
  • Deduction of Premiums
  • RRSP Deduction Limit
• Carryforward of Unused RRSP Deduction Room
• Persons Connected With Their Employers
• Part-Year Residents and Non-Residents
• Contributions to a Spousal RRSP
• Payment of Premium in Kind
• Deduction for Refund of Undeducted Contributions made after 1990
• Part X.1 Tax on Excess Contributions made after 1990
• Recontribution to an RRSP
• Bankrupt Taxpayers
• Glossary
  • Earned Income
  • Net Past Service Pension Adjustment
  • Pension Adjustment
  • Premium
  • RRSP Deduction limit
  • RRSP Dollar Limit
  • Spouse

Discussion and Interpretation

General Comments

1. Various topics concerning RRSP contributions are discussed in detail under the headings listed above. Some of the topics, however, are not relevant to all taxpayers. For example, if the taxpayer has always been self-employed or has never worked for an employer who participates in an RPP, or a DPSP, the calculation of the RRSP deduction limit is fairly straightforward. It is simply equal to the lesser of 18% of the taxpayer's earned income for the previous year and the RRSP dollar limit for the current year. If the amount a taxpayer deducts for RRSP contributions is less than the taxpayer's RRSP deduction limit for the year, the unused portion is generally carried forward, forming part of the taxpayer's RRSP deduction limit for the following year. The following example shows how the RRSP deduction limit for 1994 is calculated for such a taxpayer if the taxpayer had earned income of $30,000 in 1993 and unused RRSP deduction room from 1993 of $500.

Taxpayers in this situation probably will find the comments in 8 to 20 below of limited relevance since these paragraphs explain the law as it applies to more complex pension situations. Employees who belong to an PP or a DPSP calculate the RRSP deduction limit in much the same way except that it is reduced by the taxpayer's pension adjustments for the previous year and the taxpayer's net past service pension adjustment for the current year. Such taxpayers, if they do not have a net past service pension adjustment for the current year, may also find the comments in 8 to 20 of limited relevance. Information on the more common RRSP situations is contained in the income tax guide entitled RRSPs and Other Registered Plans for Retirement.

The meaning of the terms "net past service pension adjustment" and "pension adjustment" is discussed in the Glossary.

2. Contributions made to an RRSP after 1990 may, within specified limits, be deducted from income under paragraph 60(i). The contributions may be for premiums (see explanation of the term "premiums" in the Glossary) paid to a plan under which the contributor or the contributor's spouse is the annuitant pursuant to subsections 146(5) and (5.1) respectively.

The meaning of the term "spouse" is discussed in the Glossary.

3. Subsections 146(2) and (3) set out the conditions for registration of a retirement savings plan. One condition is that no contributions may be made to an RRSP after its maturity. Paragraph 146(2)(b.4) provides that maturity must occur before the year in which the annuitant becomes 72 years of age. Therefore, a taxpayer may contribute to his or her own RRSP up to the end of the year that the taxpayer turns 71 years of age. If the contribution is made to an unmatured RRSP under which the taxpayer's spouse is the annuitant, the taxpayer may contribute up to the end of the year in which his or her spouse turns 71 years of age.

Interest Expense and Administration Fees

4. Paragraph 18(11)(b) provides that interest on money borrowed by taxpayers to pay premiums to their own or their spouse's RRSP and interest on money borrowed to make repayments of amounts withdrawn under the Home Buyers' Plan are not deductible in computing income. Also prohibited is the deduction of interest expense incurred to purchase an income-producing property (such as shares listed on a prescribed stock exchange in Canada or Canada Savings Bonds) after the property is transferred to an RRSP as the payment of a premium. Reasonable administration fees paid by a taxpayer to the trustee of the taxpayer's own RRSP (but not to the trustee of a spousal RRSP) are considered to be deductible expenses in computing income from property and are not prohibited by the rules in section 18. These administration fees relate to the overall direction and management of the affairs of the RRSP trust and are for the type of services normally provided to the annuitant. Fees for investment counselling are only deductible if they meet the conditions of paragraph 20(1)(bb). That paragraph requires, among other things, that the services be for shares or securities of the taxpayer. As the investments of the RRSP trust are not the investments of the taxpayer, the taxpayer cannot deduct the fees under paragraph 20(1)(bb) for investment counselling provided to the trust. On the other hand, brokerage fees and commissions incurred by the RRSP trust form part of the cost of acquiring or disposing of investments. Accordingly, they should be accounted for in determining the cost of the investment and in determining its proceeds of disposition.

Contributions to the Taxpayer's RRSP

Deduction of Premiums

5. Subsection 146(5) contains the rules governing the deductibility of premiums paid by a taxpayer to RRSPs under which the taxpayer is the annuitant. Beginning in 1991, the maximum amount that a taxpayer may deduct in computing income for a year is limited to the lesser of:

a) the taxpayer's RRSP deduction limit for the year (see 8 below); and

b) the amount, if any, by which the total of all premiums paid after 1990 and within 60 days after the end of the year (other than the exceptions noted in 7 below) exceeds the amount, if any, by which:

- the total amount deducted by the taxpayer under subsection 147.3(13.1) for the year or a preceding year:

exceeds

- the total amount for transfers before 1991 from RPPs, deemed by paragraph 147.3(10)(b) or (c) to be a premium paid by the taxpayer to an RRSP.

Subsection 147.3(13.1), referred to in (b) above, provides a deduction for withdrawals of RRSP premiums resulting from an excess transfer of a lump sum payment from an RPP to an RRSP or a RRIF.

Any RRSP premiums paid after 1990 may be carried forward and deducted under subsection 146(5) for any subsequent year, to the extent that they were:

- not deducted for the year in which they were paid, or

- in the case of premiums paid in the first 60 days of a year, not deducted for the immediately preceding year.

6. If, at any time in a year, the taxpayer's undeducted premiums (as determined under subsection 204.2(1.2)), exceed the taxpayer's RRSP deduction limit (see 8 below), the taxpayer may be liable for tax under Part X.1 on the excess contributions until they are withdrawn from the plan (see 30 below). The taxpayer may withdraw the excess contributions out of the RRSP on a tax-free basis if the withdrawal is made within a specified time (see 27 below for the conditions that must be met).

7. Certain premiums may not be deducted under subsection 146(5) in computing income for a year. These include all or any portion of premiums:

a) that were paid to an RRSP at a time when the taxpayer was not the annuitant of the RRSP;

b) that were deducted in computing the taxpayer's income for a preceding taxation year;

c) that were designated as a transfer of:

- certain superannuation or pension benefits, or eligible amounts described in section 60.01, subsection 104(27) or (27.1) or paragraph 147(10.2)(d), to the extent permitted under paragraph 60(j);

- retiring allowances under paragraph 60(j.1); or

- certain payments such as RRSP refunds of premiums, RRSP commutation benefits, or eligible amounts in respect of registered retirement income funds (RRIFs) (within the meaning assigned by subsection 146.3(6.11)), to the extent provided under paragraph 60(l);

d) for which the taxpayer has received a payment that was deducted under subsection 146(8.2) in computing the taxpayer's income for a preceding taxation year (see 25 to 29 below); or

e) that were deductible under subsection 146(6.1) in computing the taxpayer's income for any taxation year (see 35 and 36 below).

Transfers of refunds of premiums are covered in the current version of IT-500, Registered Retirement Savings Plans - Death of Annuitant.

Note: Bill C-59 proposes to amend subsection 146(5) so that contributions made by a taxpayer to his or her RRSP after March 1, 1994, would generally not be deductible if the contribution is withdrawn as an "eligible amount" (as defined in subsection 146.01(1)) under the Home Buyers' Plan, within 90 days after it was made, to the extent that the contribution is greater than the fair market value of the balance in the RRSP after the withdrawal.

RRSP Deduction Limit

8. After 1990, the maximum amount a taxpayer may deduct for RRSP contributions under subsection 146(5) is limited to the taxpayer's RRSP deduction limit for the year. The rules for calculating the RRSP deduction limit are contained in subsection 146(1) under the definition of "RRSP deduction limit." In general, a taxpayer's RRSP deduction limit for a particular year is equal to:

the taxpayer's unused RRSP deduction room at the end of the immediately preceding year (see 10 to 16 below);

plus: the amount, if any, by which the lesser of:

a) 18% of the taxpayer's "earned income" for the immediately preceding year, and

b) the "RRSP dollar limit" for the particular year,

exceeds

c) the taxpayer's "pension adjustments" (Pas) for the immediately preceding year or a prescribed amount (see the Note below) for the year,

minus: the taxpayer's "net past service pension adjustment" (net PSPA) for the particular year.

A taxpayer's Pas can be generally described as a measure of the total benefits that accrued to the taxpayer in the year under all employer- sponsored RPPs and DPSPs. A taxpayer's net PSPA is essentially a measure of the improvements made to the taxpayer's benefits under a defined benefit RPP in respect of post-1989 past service. The definition of net PSPA includes any amounts prescribed for this purpose. In addition, the RRSP deduction limit allows for a carryover of unused RRSP deduction room (see 10 to 16 below). Unused RRSP deduction room will usually result if the amount a taxpayer deducts for RRSP contributions for a particular year is less than the taxpayer's RRSP deduction limit for the year. The RRSP deduction limit of certain taxpayers may be reduced if they are connected with their employers and they join their employers' RPPs or recommence to accrue lifetime retirement benefits under their employers' RPPs. The comments in 17 to 20 below explain this special rule in greater detail.

Note: The following proposed changes may affect an individual's PA or PSPA, and the calculation of an individual's RRSP deduction limit for a year. These proposed changes relate to "government-sponsored retirement arrangements (GSRA)," "foreign plans (Fps)," and "specified retirement arrangements (SRAs)." Proposed subsections 8308.4(1), 8308.1(1), and 8308.3(1) of the draft Regulations released by the Minister of Finance on December 18, 1992, contain the definitions of "GSRA," "FP," and "SRA," respectively.

In determining a taxpayer's RRSP deduction limit as defined under "RRSP deduction limit" in subsection 146(1), a prescribed amount in respect of a taxpayer for the year is deducted. The draft Regulations propose to add new subsection 8308.4(2). This proposed subsection prescribes an amount for certain individuals who are entitled to benefits under a "GSRA" which is defined in new subsection 8308.4(1) of the draft Regulations. As a result, the prescribed amount for a taxpayer who is entitled to benefits under a GSRA is deducted in determining the taxpayer's RRSP deduction limit. If promulgated as proposed, new subsection 8308.4(2) will apply for 1994 and subsequent taxation years.

In addition, the draft Regulations propose to include new section 8308.2. This proposed section prescribes an amount for certain individuals who are resident in Canada and who participate in foreign plans. The prescribed amount is deducted in determining the individual's RRSP deduction limit as defined under "RRSP deduction limit" in subsection 146(1). If promulgated as proposed, new subsection 8308.2 of the draft Regulations will apply for 1994 and subsequent taxation years. Proposed section 8308.2 of the draft Regulations also sets out the calculation of the prescribed amount.

The draft Regulations also include a proposal to amend subsection 8301(1). It is proposed that the definition of PA be amended to include additional amounts in the Pas of certain individuals who participate in Fps or SRAs. If promulgated as proposed, subsection 8301(1) of the draft Regulations will apply to the determination of Pas for Fps for 1992 and subsequent taxation years and for SRAs for 1993 and subsequent taxation years. The meaning of the term "pension adjustment" is discussed in the Glossary.

The definition of "net past service pension adjustment" in subsection 146(1) includes in a taxpayer's net PSPA any amounts prescribed by new section 8308.4 of the Regulations which was included in the draft amendments to the Regulations released on December 18, 1992. This proposed new section affects taxpayers who accrue benefits under "GSRAs." If new section 8308.4 of the Regulations is promulgated as proposed, it will apply to 1994 and subsequent taxation years. The meaning of the term "net past service pension adjustment" is discussed in the Glossary.

In addition, the draft Regulations include a proposal to amend the definition of PSPA in subsection 8303(1) to include additional amounts in the PSPAs of certain individuals who participate in Fps or SRAs. If promulgated as proposed, this amendment to subsection 8303(1) of the Regulations will apply to the determination of PSPAs for Fps for 1993 and subsequent taxation years and for SRAs for 1994 and subsequent taxation years.

9. The following example shows how the RRSP deduction limit for 1993 is calculated for a taxpayer who is a member of an employer-sponsored RPP or DPSP. The taxpayer had earned income of $30,000 in 1992, a 1992 PA of $2,500 and no net PSPA for 1993.

Example A

(1) RRSP dollar limit, Pas and net PSPA are explained in the Glossary.

(2) This amount cannot be negative. Therefore, in cases where total Pas for the immediately preceding year exceed the lesser of the RRSP dollar limit for the current year and 18% of earned income for the immediately preceding year, this amount is nil.

As shown in the example, the RRSP deduction limit has been reduced to reflect the extent to which the taxpayer has been credited with benefits under RPPs and DPSPs in the previous year.

Carryforward of Unused RRSP Deduction Room

10. The term "unused RRSP deduction room" is defined in subsection 146(1). In general, the unused RRSP deduction room of a taxpayer at the end of a year is the taxpayer's unused RRSP deduction room carried forward from the immediately preceding year, plus additional RRSP deduction room that became available in the year, minus RRSP deduction room used in the year. Because a taxpayer's unused RRSP deduction room at the end of a particular year forms part of the taxpayer's RRSP deduction limit for the immediately following year, the taxpayer will not, subject to the carryforward limit discussed in 12 and 13 below, lose the RRSP deduction if the taxpayer does not fully use his or her RRSP deduction limit for a given year.

11. The term "unused RRSP deduction room" is limited to amounts accumulated for taxation years after 1990. For the purpose of calculating a taxpayer's RRSP deduction limit for 1991, paragraph (a) of the definition "unused RRSP deduction room" in subsection 146(1) provides that a taxpayer's unused RRSP deduction room at the end of 1990 is nil.

12. A taxpayer's unused RRSP deduction room at the end of a year is the lesser of two amounts. The first amount is the RRSP deduction room that is available for carryforward. This amount, which can be positive or negative, is determined under the rules contained in subparagraph (b)(i) of the definition "unused RRSP deduction room" in subsection 146(1) and is essentially equal to:

a) the taxpayer's RRSP deduction limit for the year

minus

b) the total of:

- the amounts deducted for the year under subsections 146(5) and (5.1) for premiums paid by the taxpayer to RRSPs under which the taxpayer or the taxpayer's spouse is the annuitant; and

- the amounts deducted for the year under paragraph 60(v) for contributions made by the taxpayer to a prescribed provincial pension plan (see section 7800 of the Regulations).

The second amount (the "carryforward limit," as discussed in 13 below) imposes an overall limit on the amount of unused RRSP deduction room that may be carried forward.

13. The carryforward limit, as determined under the rules contained in subparagraph (b)(ii) of the definition "unused RRSP deduction room" in subsection 146(1), is the greater of:

a) the total of all amounts for each of the current year and the six immediately preceding years (but only years after 1990), that is equal to the lesser of:

- the RRSP dollar limit for the year; and

- 18% of the taxpayer's earned income for the previous year; and

b) 7/2 of the RRSP dollar limit for the current year.

The limitation in (a) allows unused RRSP deduction room to be carried forward for a maximum of seven years, starting with any RRSP deduction room not used in 1991. For taxpayers who participate in RPPs and DPSPs, the carryforward period will generally be longer because their Pas will usually keep the amount determined under subparagraph (b)(i) of the definition "unused RRSP deduction room" in subsection 146(1) less than the limitations in subparagraph (b)(ii) of that definition. The limitation in 13(b) allows a considerable amount of unused RRSP deduction room to be carried forward indefinitely. This rule would be beneficial to taxpayers who have retired or otherwise been out of the labour force for a number of years as it prevents their unused RRSP deduction room from falling to zero.

14. A taxpayer's unused RRSP deduction room at the end of a year will usually be positive or zero, but it can also be negative. For example, a taxpayer would have negative unused RRSP deduction room if the taxpayer has a net PSPA that exceeds the available RRSP deduction room for the year. Since a taxpayer's unused RRSP deduction room at the end of a year forms part of the taxpayer's RRSP deduction limit for the following year, negative unused RRSP deduction room will usually reduce the taxpayer's RRSP deduction limit for the following year. The taxpayer has to carry forward the negative unused RRSP deduction room until it is offset by RRSP deduction room that becomes available in later years.

15. To show how a taxpayer's unused RRSP deduction room at the end of a year is calculated, Example A in 9 above is continued below. Assume that the taxpayer claimed an RRSP deduction of $2,000 for 1993.

Example B

In this example, the entire $900 is available for carryforward to 1994.

16. Example C below shows how the carryforward of unused RRSP deduction room may be restricted after 1997. Assume that the taxpayer's unused RRSP deduction room at the end of 1998 (before applying the carryforward limit) is $72,250 and that the amounts shown below in column (2) reflect 18% of the taxpayer's earned income for each of the relevant years.

Example C

Part I - Calculation of unused RRSP deduction room before carryforward limit (subparagraph (b)(i) of the definition "unused RRSP deduction room" in subsection 146(1))

Part II - Calculation of carryforward limit (subparagraph (b)(ii) of the definition "unused RRSP deduction room" in subsection 146(1))

Total for the current year and the six immediately preceding years of the amount for each year that is equal to the lesser of the RRSP dollar limit for the year and 18% of the taxpayer's earned income for the previous year:

(1) The RRSP dollar limits for years after 1996 will be $15,500 as adjusted, if necessary, to reflect increases in the average Canadian wage. The amounts shown as limits for the years 1997 and 1998 are for illustrative purposes only.

In this example, the taxpayer's unused RRSP deduction room at the end of 1998 has been restricted to $61,250. This amount forms part of the taxpayer's RRSP deduction limit for 1999.

Persons Connected With Their Employers

17. Taxpayers may find their RRSP deduction limit reduced if they are or were connected with their employers after 1989 and, after 1990, joined their employers' RPPs or recommenced to accrue lifetime retirement benefits under a defined benefit provision of their employers' RPPs. Subsection 8500(3) of the Regulations provides that a person is connected with an employer at any time if, at that time, the person:

a) owns, directly or indirectly, 10% or more of the issued shares of any class of the capital stock of the employer or of any other corporation that is related to the employer;

b) does not deal at arm's length with the employer; or

c) is deemed, by paragraph (d) of the definition of "specified shareholder" in subsection 248(1), to be a specified shareholder of the employer.

In addition, subsection 8500(3) of the Regulations deems, for the purpose of determining whether or not a person is connected with an employer, a person to own shares of a corporation owned by:

- a person with whom the person does not deal at arm's length;

- a trust of which the person is a beneficiary, to the extent provided by paragraph 8500(3)(e); or

- a partnership of which the person is a member, to the extent provided by paragraph 8500(3)(f).

Also, a person who has a contractual right to acquire shares of the capital stock of a corporation is deemed by paragraph 8500(3)(g) of the Regulations to own those shares if one of the main reasons for the existence of the right may reasonably be considered to be that the person not be connected with an employer.

18. Subsection 8308(2) of the Regulations prescribes a reduction to a taxpayer's RRSP deduction limit for a year if:

a) at any time in the year, the taxpayer becomes a member of the RPP or lifetime retirement benefits begin to accrue to the taxpayer under a defined benefit provision of the RPP following a period in which lifetime retirement benefits did not accrue to the taxpayer;

b) the taxpayer is connected at that time, or was connected at any time after 1989, with an employer who participates in the RPP for the benefit of the taxpayer;

c) the taxpayer did not have a positive PA for 1990; and

d) subsection 8308(2) has not previously applied to prescribe an amount for the taxpayer.

19. The amount prescribed by subsection 8308(2) of the Regulations is equal to the lesser of:

a) 18% of the taxpayer's earned income for RRSP purposes for 1990; and

b) $11,500.

As indicated in 18 above, this amount reduces the taxpayer's RRSP deduction limit for a year. It also affects the taxpayer's unused RRSP deduction room at the end of a year (see 10 to 12 above) and the taxpayer's cumulative excess amount in respect of RRSPs at any time in a year (see 30 below). The taxpayer's employer must file Form T1007, Connected Person Information Return, within 60 days after the taxpayer becomes a member of the RPP or recommences to accrue lifetime retirement benefits under a defined benefit provision of the RPP unless the employer has previously filed the information return in respect of the taxpayer.

20. The following example shows how the RRSP deduction limit of persons connected with their employers is calculated. Assume that the taxpayer is connected with his or her employer at the time the taxpayer joined the employer's RPP in 1993. The taxpayer had earned income of $40,000 in 1990 and $50,000 in 1992, unused RRSP deduction room at the end of 1992 of $1,000, no PA for 1990 and 1992, and no net PSPA for 1993.

Unused RRSP deduction room at the end of

(1) This amount cannot be negative. Therefore, in cases where the prescribed amount exceeds the lesser of the RRSP dollar limit for the current year and 18% of earned income for the immediately preceding year, this amount is nil.

The taxpayer's RRSP deduction limit for 1993 is reduced by the prescribed amount of $7,200 to $2,800. If the rule for connected persons had not applied, the taxpayer's RRSP deduction limit would be $10,000. Because this rule can apply only once in a taxpayer's lifetime, the taxpayer's RRSP deduction limit for subsequent years will not be affected by this rule.

Part-Year Residents and Non-Residents

21. For 1990 and subsequent years, the definition of "earned income" in subsection 146(1) includes certain income and requires the deduction of certain losses in its calculation in respect of a taxpayer for a period in the year throughout which the taxpayer was not resident in Canada for tax purposes. The definition of earned income includes specific income earned in Canada in a period throughout which a taxpayer was not resident in Canada except for any part of that income exempt from taxation in Canada by a treaty or an agreement with another country. The definition does not exclude any losses from a business incurred in Canada during a period throughout which a taxpayer was a non-resident. This rule prevents a non-resident or a part-year resident from obtaining RRSP deduction room based on income not taxable in Canada. Form T1023, RRSP Deduction Limit - Calculation of Earned Income for 19--, which is included in the income tax guide called RRSPs and Other Registered Plans for Retirement, contains the calculation of earned income for non-resident individuals.

22. In computing the taxable income of a part-year resident pursuant to section 114, the taxation year for the purpose of subsection 146(5) is the calendar year. Therefore, RRSP contributions made within 60 days after the end of the calendar year in which the taxpayer:

- ceased to be a resident of Canada,

- became a resident of Canada, or

- is taxable pursuant to section 115 of the Income Tax Act,

are deductible in computing taxable income for that year to the extent permitted by subsection 146(5).

Contributions to a Spousal RRSP

23. Contributions made by a taxpayer to an RRSP under which the taxpayer's spouse is the annuitant may be deducted, within specified limits, by the taxpayer under subsection 146(5.1). In general terms, the maximum amount that a taxpayer may deduct under subsection 146(5.1) in computing income for a year after 1990 is limited to the lesser of:

a) the total of all contributions made by the taxpayer after 1990 and within 60 days after the end of the year to the RRSP of the taxpayer's spouse, to the extent that the contributions were not deducted by the taxpayer in computing income for a previous year; and

b) the amount by which the taxpayer's "RRSP deduction limit" (see paragraph 9) for the year exceeds the amount deducted by the taxpayer under subsection 146(5) in computing the taxpayer's income for the year.

In order for the spousal contribution to be deductible under subsection 146(5.1), the taxpayer's spouse must be the annuitant of the spousal RRSP at the time the taxpayer makes the contribution. Because of the limitation in (b) above, the maximum amount that a taxpayer may deduct in any year after 1990 for contributions to the taxpayer's own RRSP and to an RRSP under which the taxpayer's spouse is the annuitant cannot exceed the taxpayer's "RRSP deduction limit" for the year. Under paragraph 60(j.2), for the 1989 to 1994 taxation years, a taxpayer may be entitled to claim a deduction for the transfer of up to $6,000 of periodic registered pension plan and deferred profit sharing plan income to his or her spouse's RRSP, in the year that the payments are received and included in the taxpayer's income or within 60 days after the end of that year. More details about the rules governing the deductibility of spousal contributions, transfers under paragraph 60(j.2), and the taxability of amounts paid out of spousal RRSPs are discussed in the current version of IT-307, Spousal Registered Retirement Savings Plans.

Payment of Premium in Kind

24. Subsection 146(5) refers to the payment of premiums under the taxpayer's own RRSP, while subsection 146(5.1) refers to a payment under a spousal RRSP. Payment could include a contribution or transfer of property other than cash by the taxpayer. Such a contribution or transfer constitutes a disposition of property within the meaning of the definition of "disposition" in section 54. The taxpayer is considered to have disposed of the property at the time the contribution or transfer of the property is made. The proceeds of disposition and the amount of premium considered to be paid are equal to the fair market value of the property transferred or contributed by the taxpayer at the time of its disposition. Any taxable capital gain arising on the disposition is required to be included in computing income. Any resultant capital loss, however, is deemed to be nil for tax purposes by subparagraph 40(2)(g)(iv).

Deduction for Refund of Undeducted Contributions made after 1990

25. If all or any portion of the contributions made by a taxpayer after 1990 to RRSPs under which the taxpayer or the taxpayer's spouse is the annuitant have not been deducted in computing the taxpayer's income, the taxpayer may either keep the undeducted contributions in the plan and claim a deduction for them in a later year (see 5 above) or withdraw the undeducted contributions out of the plan on a tax-free basis by virtue of subsection 146(8.2). (It should be noted that this bulletin uses the term "undeducted contributions" for the purpose of the subsection 146(8.2) deduction. This term differs from the term assigned to "undeducted RRSP premiums" in subsection 204.2(1.2) for the purpose of the Part X.1 tax as discussed in 30 below.)

26. Subject to the anti-avoidance rule mentioned in 28 below, subsection 146(8.2) provides an offsetting deduction for refunds of undeducted contributions from RRSPs or RRIFs that are included in computing a taxpayer's income. It does not apply to:

a) a withdrawal prescribed by subsection 8307(6) of the Regulations, which is an amount withdrawn out of an RRSP to create room for past service benefits under an RPP;

b) for 1991 and later years, a withdrawal of RRSP contributions made by direct transfer from a DPSP in accordance with subsection 147(19);

c) for 1991, a withdrawal of RRSP contributions made by direct transfer from a RPP in accordance with any of subsections 147.3(1) and (4) to (7);

d) for 1992 and later years, a withdrawal of RRSP contributions made by direct transfer from an RPP and;

e) for 1992 and later years, a withdrawal of RRSP contributions made by transfer from a prescribed provincial pension plan (in accordance with paragraph 60(v)) in circumstances to which subsection 146(21) applies.

27. To qualify for the offsetting deduction under subsection 146(8.2), the withdrawal must have been made:

a) in the year in which the contributions were made by the taxpayer;

b) in the year in which the Notice of Assessment or Reassessment for the year of contribution was sent to the taxpayer; or

c) in the year immediately following either one of the years referred to in (a) and (b) above.

For example, if a taxpayer made an RRSP contribution in 1991 but did not deduct it from income and the Notice of Assessment for 1991 was sent to the taxpayer in 1992, the taxpayer may claim the offsetting deduction under subsection 146(8.2) if the taxpayer withdraws the undeducted contribution in 1991, 1992 or 1993. Form T746, Calculation of Deduction for Refund of RRSP Excess Contributions, may be used to determine the offsetting deduction permitted under subsection 146(8.2). Undeducted contributions may be withdrawn out of the plan without tax deducted at source if the taxpayer completes Form T3012A, Tax Deduction Waiver on a Refund of Undeducted RRSP Contributions Made in 19--, and has it duly approved by Revenue Canada. Both forms are available from your Revenue Canada taxation services office.

28. A deduction under subsection 146(8.2) for a refund of undeducted contributions is not allowed when it is reasonable to consider that:

a) the taxpayer did not reasonably expect to be able to deduct the full amount of the contributions in the year in which the contributions were made or in the immediately preceding year; and

b) the taxpayer made all or part of the contributions with the intent of later withdrawing them and claiming a deduction for them under subsection 146(8.2).

29. Where a taxpayer has deducted an amount under subsection 146(8.2) for a refund of undeducted contributions, the contributions corresponding to the refund are deemed under subsection 146(8.21), for certain purposes, not to have been RRSP contributions made by the taxpayer to an RRSP. This rule ensures that once a deduction under subsection 146(8.2) has been claimed for a year for a refund of undeducted contributions, the taxpayer cannot then claim a deduction under subsection 146(5) or (5.1) for any year for the same contributions. Subsection 146(8.21) also applies for the purpose of the attribution rules in subsections 146(8.3) and 146.3(5.1), which require certain payments made to a taxpayer's spouse from the spouse's RRSPs or RRIFs to be included in the taxpayer's income. Therefore, where undeducted contributions made by the taxpayer to his or her spouse's RRSP are later withdrawn and deducted under subsection 146(8.2) by the taxpayer, the contributions are deemed after the withdrawal not to be contributions made by the taxpayer to a spousal RRSP for the purpose of the attribution rules.

Part X.1 Tax on Excess Contributions made after 1990

30. If a taxpayer has made an excess contribution, the taxpayer may be subject to Part X.1 tax for the time the excess contribution remained in the RRSP. For excess contributions made after 1990, the tax payable by a taxpayer under subsection 204.1(2.1) for any month after December 1990 is equal to 1% of the taxpayer's "cumulative excess amount" at the end of the month. The term "cumulative excess amount" is defined in subsection 204.2(1.1). Generally, the cumulative excess amount of a taxpayer in respect of RRSPs at any time in a year is the amount, if any, by which

a) the taxpayer's "undeducted RRSP premiums" at that time, as defined in subsection 204.2(1.2);

exceeds

b) the total of:

- the taxpayer's RRSP deduction limit at that time for the year, as determined under subsection 204.2(1.1); and

- if the taxpayer was 18 years of age or older in the previous year, $8,000, otherwise, nil.

The calculation of the taxpayer's RRSP deduction limit in (b) is essentially the same as that provided for determining the taxpayer's RRSP deduction limit for the year under the definition of "RRSP deduction limit" in subsection 146(1) except that the net PSPA in this calculation depends on the particular time at which the taxpayer's RRSP deduction limit is calculated. (The rules for calculating the RRSP deduction limit are discussed in 8 to 16 above. If the special rule for persons connected with their employers applies, refer to 17 to 20 above.)

For 1992 and subsequent years, subsection 204.2(1.2) provides that RRSP contributions by way of a transfer from a prescribed provincial pension plan, (i.e. the Saskatchewan Pension Plan) in situations to which subsection 146(21) applies, are not included in determining an individual's cumulative excess amount. Generally, subsection 146(21) allows for the direct tax-free transfer of lump sum amounts from prescribed provincial pension plans.

31. Plans that are registered after 1990 are required by paragraph 146(2)(c.1) to permit the withdrawal of amounts by a taxpayer to reduce the amount of tax otherwise payable under Part X.1 by the taxpayer. In other words, RRSPs are not required to permit the withdrawals under subsection 146(8.2) except where tax under Part X.1 is otherwise payable. That is, a withdrawal can be made by a taxpayer out of his or her own RRSP as well as out of a spousal RRSP if the withdrawal reduces the Part X.1 tax otherwise payable by the taxpayer. Pre-1991 plans may be amended to contain this provision.

32. Since contributions can be made only to an unmatured plan, a "cumulative excess amount" can be created in a plan only before its maturity. However, it is possible to make a refund of such amounts after the plan has matured and been annuitized. This can be done by making a partial commutation of the annuity with the cooperation of the issuer. Although there is no time limit for paying out the cumulative excess amount, any delay in making the payment would increase the amount of tax payable under Part X.1 and could jeopardize the deduction available under subsection 146(8.2). A deduction under subsection 146(8.2) may be available if certain conditions are met (see 25 to 29), the commutation payment from the matured RRSP is received within a specified time period, and the payment is from an RRSP in respect of the undeducted contributions.If an excess was contributed to the plan and a retirement income was acquired on maturity with the total contributions (including the excess), without partial commutation as noted above, any annuity payments received by the beneficiary would be fully taxable even though only part of the contribution to the plan was deductible in computing income.

33. A taxpayer to whom the Part X.1 tax applies in the year is required by subsection 204.3(1) to file Form T1-OVP, Individual Income Tax Return for Registered Retirement Savings Plan Excess Contributions, within 90 days after the end of the year and to pay the estimated tax payable at that time. Form T1-OVP is available from your Revenue Canada taxation services office.

34. Effective June 27, 1990, subsection 204.1(4) allows the Minister of National Revenue to waive the Part X.1 tax where the cumulative excess amount arose because of a reasonable error and reasonable steps are being taken to remove the excess.

Recontribution to an RRSP

35. Effective for the 1991 and subsequent taxation years, subsection 146(6.1) provides a special deduction for prescribed premiums (see 36 below) paid to an RRSP, other than those premiums that are designated for purposes of paragraphs 60(j), (j.1) or (l). This provision allows a taxpayer to recontribute certain amounts which have been withdrawn by the taxpayer from an RRSP in order to create enough room for past service benefits under an RPP. The deduction is allowed in computing the taxpayer's income for the particular year in which the RRSP withdrawal was made rather than for the year in which the amount was recontributed. As a result, the deduction will offset the withdrawn amount included in income. Subsection 152(6), which provides for the reassessment of tax payable by a taxpayer for a taxation year under certain circumstances, gives the taxpayer the right to amend a return in order to claim the deduction.

36. Subsection 8307(7) of the Regulations prescribes premiums for the purpose of subsection 146(6.1). A premium is prescribed for a particular taxation year if:

a) the taxpayer withdrew an amount in the year from an RRSP and designated the amount in accordance with subparagraph 8307(3)(a)(ii) for purposes of a certification for past service benefits under an RPP;

b) it is later determined that the taxpayer withdrew too large an amount because of a reasonable error, or did not need to withdraw any amount because the Minister has refused to register the pension plan under which the benefits are provided;

c) the premium is paid by the taxpayer within 12 months after it is determined that the taxpayer withdrew too large an amount;

d) the premium does not exceed the portion of the RRSP withdrawal that was withdrawn in error or was withdrawn unnecessarily;

e) the taxpayer files with the Minister of National Revenue, on or before the taxpayer's tax-filing deadline for the year in which the premium was paid (generally April 30th of the following year), a written notice in which the premium is designated as a recontribution of the withdrawn amount; and

f) no other amount has been designated as a recontribution of the withdrawn amount.

Bankrupt Taxpayers

37. Beginning in 1991, special rules apply to ensure that the RRSP deduction limit and unused RRSP deduction room of a bankrupt taxpayer and the RRSP excess contribution tax payable by such a taxpayer will be determined as if the taxpayer had not become bankrupt. First, the rule in paragraph 128(2)(d), which divides the calendar year in which the taxpayer becomes bankrupt into two taxation years, does not apply for purposes of the definitions in subsection 146(1) relating to RRSPs and the rules in Part X.1 of the Act regarding the calculation of tax on excess contributions to RRSPs. Second, for purposes of computing the taxpayer's unused RRSP deduction room and the Part X.1 tax, where a bankrupt taxpayer has two taxation years in a calendar year, the amounts deducted by the taxpayer for each of the two years for contributions to RRSPs will be treated as if they were deducted in computing the taxpayer's income for the calendar year. Finally, the maximum deductions that may be claimed by a bankrupt taxpayer under subsections 146(5) and (5.1) for RRSP contributions for the second taxation year (day of bankruptcy to the end of the calendar year) ending in the calendar year of bankruptcy are reduced by the amount deducted by the taxpayer for the first taxation year (January 1 to the day before the bankruptcy) in that calendar year.

Glossary

Earned income: The rules for calculating a taxpayer's earned income for RRSP purposes are set out under the definition of "earned income" in subsection 146(1). A taxpayer's RRSP deduction limit for a year is based on the taxpayer's earned income for the immediately preceding year. Certain rules affecting the calculation of earned income for non- residents and part-year residents are discussed in 21 above. Form T1023, RRSP Deduction Limit - Calculation of Earned Income for 19--, may be used to calculate earned income. This form is included in the income tax guide called RRSPs and Other Registered Plans for Retirement and is also available from your Revenue Canada taxation services office.

Net past service pension adjustment (net PSPA): The term "net past service pension adjustment" is defined in subsection 146(1). This amount, which can be positive or negative, is the total of the taxpayer's PSPAs for the year minus the taxpayer's PSPA withdrawals that were designated for PSPAs certified for the year. A positive net PSPA for a year reduces the taxpayer's RRSP deduction limit for the year and the taxpayer's unused RRSP deduction room at the end of the year. Sections 8303 and 8304 of the Regulations contain the rules for determining the PSPA of a taxpayer for a year in respect of an employer. A PSPA is, in general, the total of the additional pension credits that would have been determined for post-1989 past service if the RPP had provided for the upgraded benefits or additional period of pensionable service at the time each pension credit was first required to be determined, minus certain amounts transferred to the RPP to fund those benefits. The amount of a taxpayer's PSPA withdrawals is defined in subsection 8307(5) and can generally be described as the total of all amounts withdrawn from an RRSP to create additional room to accommodate a PSPA for past service benefits in a defined benefit RPP. The Plan Administrators Past Service Pension Adjustment Guide describes PSPAs and PSPA withdrawals in greater detail.

Note: The definition of "net past service pension adjustment" in subsection 146(1) includes in a taxpayer's net PSPA any amounts prescribed by new section 8308.4 of the Regulations which was included in the draft amendments to the Regulations released on December 18, 1992. This proposed new section affects taxpayers who accrue benefits under "government-sponsored retirement arrangements." If new section 8308.4 of the Regulations is promulgated as proposed, it will apply to 1994 and subsequent taxation years.

In addition, the draft Regulations include a proposal to amend the definition of PSPA in subsection 8303(1) to include additional amounts in the PSPAs of certain individuals who participate in foreign plans or specified retirement arrangements. If promulgated as proposed, this amendment to subsection 8303(1) of the Regulations will apply to the determination of PSPAs for Fps for 1993 and subsequent taxation years and for SRAs for 1994 and subsequent taxation years. Proposed subsections 8308.4(1), 8308.1(1) and 8308.3(1) of the draft Regulations contain the definitions of "government-sponsored retirement arrangement," "foreign plan," and "specified retirement arrangement," respectively.

Pension adjustment (PA): A taxpayer's RRSP deduction limit for a year is reduced by the taxpayer's total Pas for all employers for the immediately preceding year. The PA of a taxpayer for a year in respect of an employer is defined by subsection 8301(1) of the Regulations to mean the total of the taxpayer's "pension credits" for the year in respect of the employer under DPSPs and under benefit provisions of RPPs. A pension credit is a measure of the benefits accruing to the taxpayer under a DPSP or under a benefit provision of an RPP. Under subsection 8301(2), the pension credit under a DPSP is generally the total of contributions made to the plan by the employer in the year for the employee plus forfeitures reallocated to the employee. For a money purchase RPP, the pension credit is defined by subsection 8301(4) and is normally the total of the employer's and employee's contributions made in the year plus forfeitures reallocated to the employee. In the case of a defined benefit RPP, the pension credit is defined in subsection 8301(6) and is generally determined directly from the plan benefit rate and, where relevant, the employee's pensionable earnings in the year. Subsections 8301(3), (8) and (9) contain special rules for determining pension credits when a taxpayer terminates employment and the taxpayer is entitled only to a return of employee contributions plus interest.

As part of the T4 reporting process, employers who sponsor RPPs or DPSPs are responsible for reporting each plan member's Pas. The information return reporting the PA for a particular year must be filed by the end of February of the following year. In certain circumstances involving multi-employer plans, the plan administrator must report the PA on T4A slips. Generally, a pension plan is a "multi-employer plan," as defined in subsection 8500(1) of the Regulations, if at the beginning of the year (or at the time the plan is established, if later) it is reasonable to expect that no more than 95% of the active members at any time in the year will be employed by a single employer or by a group of related employers. The Employers Pension Adjustment Calculation Guide contains more information on Pas.

Note: The draft Regulations released by the Minister of Finance on December 18, 1992, include a proposal to amend subsection 8301(1). It is proposed that the definition of PA be amended to include additional amounts in the Pas of certain individuals who participate in foreign plans or specified retirement arrangements. If promulgated as proposed, subsection 8301(1) of the draft Regulations will apply to the determination of Pas for Fps for 1992 and subsequent taxation years and for SRAs for 1993 and subsequent taxation years. Proposed subsections 8308.1(1) and 8308.3(1) contain the definitions of "foreign plan" and "specified retirement arrangement," respectively.

Premium: A "premium" is defined in subsection 146(1) as any amount paid or payable under an RRSP:

- as consideration for a contract (as specified in paragraph (a) of the definition of "retirement savings plan" in subsection 146(1)) for a retirement income when the plan matures; or

- as a contribution or deposit (as specified in paragraph (b) of the definition of "retirement savings plan" in subsection 146(1)).

After 1991, except for purposes of paragraph (b) of the definition "benefit" in subsection 146(1) and paragraph 146(2)(b.3), a premium does not include a payment designated under subsection 146.01(3) or a repayment described in subparagraph (b)(ii) of the definition of "excluded withdrawal" in subsection 146.01(1). (Amounts designated under subsection 146.01(3) are repayments of eligible amounts received pursuant to the Home Buyers' Plan. Repayments described in the definition of "excluded withdrawal" are essentially repayments of amounts that had been expected to become eligible amounts when withdrawn.)

RRSP deduction limit: After 1990, the maximum amount a taxpayer may deduct for RRSP contributions under subsection 146(5) is limited to the taxpayer's RRSP deduction limit for the year. See paragraph 8 of this bulletin for the definition of "RRSP deduction limit."

RRSP dollar limit: The RRSP dollar limit for a calendar year is defined under "RRSP dollar limit" in subsection 146(1) as the money purchase limit for the immediately preceding calendar year. The term "money purchase limit" for a calendar year is defined in subsection 147.1(1).

The RRSP dollar limit for a calendar year is used to determine a taxpayer's RRSP deduction limit for that particular year (see 8 above). The RRSP dollar limit for the years 1991 to 1996 inclusive is as follows:

The RRSP dollar limit for years after 1996 will be $15,500 adjusted to take into account increases in the average Canadian wage.

Spouse: Before 1993, for the purpose of making contributions that are deductible under subsection 146(5.1), the spouse of a taxpayer was a person to whom the taxpayer was legally married. After 1992, the meaning of the term "spouse" has been extended by subsection 252(4) to include the person of the opposite sex who is cohabiting with the taxpayer at the time in a conjugal relationship and:

- has so cohabited with the taxpayer throughout a twelve-month period ending before that time; or

- is a parent of a child of whom the taxpayer is a parent.

If the taxpayer and the person have cohabited in a conjugal relationship, at any later time, they are considered to be so cohabiting except for any period of separation of 90 days or more because of a breakdown of their conjugal relationship.

In addition, for 1993 and subsequent years, if two individuals are considered to be spouses because they are parents of the same child, they will be so considered only if they are the natural or adoptive parents of that child.

If you have any comments regarding the matters discussed in this bulletin, please send them to:

Director, Technical Publications Division
Policy and Legislation Branch
Revenue Canada
875 Heron Road
Ottawa, ON K1A 0L8

Explanation of Changes for Interpretation Bulletin IT-124R6 Contributions to Registered Retirement Savings Plans

Introduction

The purpose of the Explanation of Changes is to give the reasons for the revisions to an interpretation bulletin. It outlines revisions that we have made as a result of changes to the law, as well as changes reflecting new or revised Departmental interpretations.

Overview

Interpretation bulletin IT-124R6 deals with the deductibility of contributions to registered retirement savings plans (RRSPs). The revision to IT-124R5 was undertaken to reflect amendments to the Income Tax Act by S.C. 1990, c. 35 (former Bill C-52, which contained the Pension Reform amendments). IT-124R5 was also revised to reflect a number of amendments to the Income Tax Act by S.C. 1986, c. 55 (former Bill C-23), by S.C. 1986, c. 6 (former Bill C-84), by S.C. 1991, c. 49 (former Bill C-18), by S.C. 1993, c. 24 (former Bill C-92) and by S.C. 1994, c. 21 (former Bill C-27).

The comments in this bulletin are affected by several of the proposed amendments contained in the December 18, 1992 draft Regulations. These proposed amendments are reflected in notes at the end of Numbers 5, 7, 8, 26 and following the explanations of "net past service pension adjustment," and "pension adjustment" in the Glossary. In addition, a proposed amendment in Bill C-59, relating to the Home Buyers' Plan, is reflected in a note at the end of Number 7.

The contents of this bulletin are not affected by the amendments to the Income Tax Act by S.C. 1994, c. 8 (former Bill C-9) or the Draft Amendments to the Income Tax Regulations released on April 5, 1994.

Legislative and Other Changes

New Number 1 explains, in general terms, the amendments made by Bill C-52 to subsection 146(5). This paragraph also includes an example to illustrate how the RRSP deduction limit is calculated.

New Numbers 2 and 3 provide general comments on who may make contributions to an RRSP and when such contributions may be made.

Number 4 (replaces former Number 2) was revised to reflect a Bill C-18 amendment to subsection 18(11). This amendment clarifies that no deduction is allowed for interest expense incurred to purchase income- producing property after the property is transferred to an RRSP. This paragraph was also revised to clarify that only reasonable administration fees paid by an individual to the trustee of his or her own RRSP are deductible by the individual. In addition, comments relating to the deduction under paragraph 20(1)(bb) for investment counselling fees were added. Finally, Number 4 reflects a Bill C-92 amendment to paragraph 18(11)(b). The effect of the amendment is to preclude a deduction for interest on money borrowed to make repayments of amounts withdrawn under the Home Buyers' Plan.

New Numbers 5 to 7 (replace former Numbers 3 to 5 and 8) explain in detail the Bill C-52 amendments to subsection 146(5). Number 5 also outlines the Bill C-27 amendments to subsection 146(5).

Former Numbers 6 and 7, which discussed how an individual's RRSP limit was affected by contributions made by the individual to his or her registered pension plan (RPP), were deleted. After 1990, an individual's RRSP deduction limit for a year is reduced by the individual's pension adjustments (Pas) for the immediately preceding year.

New Number 7 (replaces former Number 1) lists the various provisions in the Act which allow a deduction for a transfer of pension and similar payments to RRSPs. One such provision is section 60.01, which was added by Bill C-18. Number 7 also refers to paragraph 60(l)(v) which was amended by Bill C-18 to permit a rollover of payments from a prescribed provincial pension plan received as a result of the death of the taxpayer's spouse. New Number 7 also explains a Bill C-27 amendment to paragraph 60(l) so that certain RRSP premiums will not be deductible under subsection 146(5) in computing income for the year. These include all or any portions of premiums that were designated as a transfer under paragraph 60(l).

A note at the end of Number 7 reflects a proposed amendment to paragraph 146(5)(a), contained in Bill C-59, which relates to the Home Buyers' Plan.

New Numbers 8 and 9 explain the Pension Reform rules for calculating an individual's RRSP deduction limit for a year.

The note at the end of new Number 8 explains some of the proposed changes in the December 18, 1992 draft Regulations. These proposed changes, which relate to "government-sponsored retirement arrangements," "foreign plans," and "specified retirement arrangements," may affect an individual's PA or PSPA, and the calculation of an individual's RRSP deduction limit for a year.

New Numbers 10 to 16 discuss in detail the carryforward component in the calculation of the RRSP deduction limit. The term "unused RRSP deduction room" is defined in subsection 146(1), which was added by Bill C-52. These paragraphs explain that where the amount a taxpayer deducts for RRSP contributions for a year is less than the taxpayer's RRSP deduction limit for the year, the unused RRSP deduction room is generally carried forward and forms part of the taxpayer's RRSP deduction limit for the following year. The example in Number 16 reflects the amendment to the RRSP dollar limit under Bill C-92.

Former Numbers 11 to 16 were deleted because they dealt with the transfer of a taxable capital gain from the disposition of a qualified farm property to an RRSP under subsections 146(5.3), (5.4) and (5.5) as a result of the introduction of the capital gains deduction.

New Numbers 17 to 20 outline the provisions of new section 8500(3) of the Regulations. These paragraphs explain the special rule for certain individuals who are "connected" with their employers after 1989 and who, after 1990, became members of the employer's RPP or recommenced to accrue lifetime retirement benefits under the RPP.

Former Numbers 17 to 22 dealt with the transfer of pension and similar payments to RRSPs and the transfer of funds between plans. These paragraphs were deleted as the subject matter will be covered in a separate bulletin.

Numbers 21 and 22 (replace former Number 9) deal with the effect of the Bill C-52 amendment to the definition of "earned income" on part-year residents and non-residents.

Number 23 (replaces former Number 10) was revised to reflect the Bill C-52 amendments dealing with spousal RRSP contributions.

Number 24 (replaces former Number 23), deals with the payment of premiums in kind.

Former Number 28, which explained the tax implications arising from excess contributions made before 1991, was deleted and replaced with new Numbers 25, 26, 27 and 28. These new paragraphs reflect the Bill C-52 amendments to the deduction allowed under subsection 146(8.2) for a refund of undeducted contributions. The amendments, which include the addition of an anti-avoidance rule to deny the deduction in certain circumstances, apply to contributions made after 1990. New Number 26 also reflects a Bill C-92 amendment which provides that subsection 146(8.2) will not apply to certain withdrawals of RRSP contributions made by direct transfer from an RPP to an RRSP or a registered retirement income fund (RRIF). Number 26 reflects a Bill C-27 amendment to subsection 146(8.2), which ensures that this subsection will not apply to a withdrawal of RRSP contributions made by transfer from a provincial plan prescribed for the purposes of paragraph 60(v) in circumstances where subsection 146(21) applies.

Former Numbers 29 and 30, which contained highlights of the 1985 budget proposals affecting RRSP contributions, were deleted as the comments are no longer relevant.

New Number 29 discusses the provisions of subsection 146(8.21) which was added by Bill C-52. Under subsection 146(8.21), contributions corresponding to a refund of undeducted contributions under subsection 146(8.2) are generally deemed not to be contributions.

New Number 30 discusses the computation of the Part X.1 penalty on excess contributions made after 1990. Number 30 replaces the comments in former Numbers 25 and 26 dealing with the calculation of the Part X.1 penalty on excess contributions made before 1991. Number 30 reflects subsection 204.2(1.1) which was added by Bill C-52 to define the meaning of the term "cumulative excess amount" in respect of RRSPs. Number 30 also outlines the Bill C-27 amendment to subsection 204.2(1.2) to exclude from the calculation of "cumulative excess amount" any RRSP contributions from a prescribed provincial plan (i.e. Saskatchewan Pension Plan) in situations to which subsection 146(21) applies.

Number 31 (replaces former Number 24) has been revised to reflect the Bill C-52 amendment to paragraph 146(2)(c.1). Specifically, plans registered after 1990 must permit the withdrawal of amounts to reduce the amount of tax otherwise payable under Part X.1.

Number 32 (replaces comments in former Number 26) reflects the Bill C-23 amendments to paragraphs 146(2)(a) and (b). The effect of these amendments is to permit partial withdrawals to be made out of an unmatured RRSP without causing deregistration and to permit a refund of excess contributions out of a matured RRSP without causing deregistration.

Number 33 (replaces former Number 27) deals with the form T1-OVP.

New Number 34 sets out the rule in subsection 204.1(4), which was added by Bill C-52. Subsection 204.1(4) permits the Minister to waive the Part X.1 tax in certain circumstances.

New Numbers 35 and 36 deal with the provisions of subsection 146(6.1) which was added by Bill C-52. This subsection provides a special deduction for prescribed premiums paid to an RRSP.

New Number 37 discusses the special rules that apply to ensure the RRSP deduction limit and unused RRSP deduction room of a bankrupt individual and the Part X.1 tax payable by such an individual will be determined as if the individual had not become bankrupt.

A Glossary has been added at the end of the bulletin to provide an explanation of certain terms used throughout the bulletin. The explanations of the terms "net past service pension adjustment," "premium," "RRSP deduction limit," "RRSP dollar limit," and "spouse" reflect amendments under Bill C-92. The definition of the term "spouse" also reflects a Bill C-27 amendment. The note at the end of the definitions of the terms "net past service pension adjustment" and "pension adjustment" reflects the applicable proposed amendments contained in the December 18, 1992 draft Regulations.