16 April 1996 External T.I. 9608935 - PAST SERVICE RPP DEDUCTIONS

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

TO BE FAXED

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Mike D. Skinner
Project Manager
Project Management Division PWGSC			960893
Phase IV Level 1						M.P. Sarazin
Phone: 775-4567
Fax:   775-4916

April 16, 1996

Dear Sir:

Re: Electing to Buy Back Past Service

This is in reply to your facsimile dated March 7, 1996, wherein you requested information regarding the amount that may be deducted under paragraph 147.2(4)(c) of the Income Tax Act (the "Act") with respect to contributions to a registered pension plan ("RPP") for past service while the employee was a contributor.

Comments

In your facsimile you have outlined what appears to be an actual fact situation related to a past transaction. The review of such transactions falls within the responsibility of tax services offices and it is the practice of this Department not to comment on such transactions when the identities of the taxpayers are not known. However, we can provide you with the following general comments which we hope will be of assistance.

Interpretation Bulletin IT-167R6 provides general information regarding the deductibility of contributions made by an employee to an RPP in respect of current service and past service. Paragraphs 7 and 8 provide the Department's views with respect to employee contributions for pre-1990 service while a contributor to an RPP. In general, the maximum deduction that an employee may claim for a year under paragraph 147.2(4)(c) of the Act is equal to the lesser of:

(a)the amount of the contributions (other than additional voluntary contributions, prescribed contributions and contributions for pre-1990 past service while not a contributor) made by the employee in the year or a preceding year (after 1962) for eligible service under an RPP in respect of a year before 1990, minus deductions previously claimed for those contributions; and

(b)$3,500 minus the total of amounts deducted for the year for current service and post-1989 past service contributions and pre-1990 past service contributions while not a contributor.

Even though the annual payments for buying back the pre-1990 past service while a contributor to an RPP may exceed $3,500, the deduction will be limited to the amount determined in (b) above which may be less than $3,500. A copy of IT-167R6 is available at all Revenue Canada tax services offices.

We trust the above comments will be of assistance to you.

Yours truly,

for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch