No provision prevented taxpayer from claiming RRSP deductions for excess contributions

Income Tax - Deferred Income Plans

Taxpayer’s Registered Retirement Savings Plan (RRSP) contribution of $43,000 in 2006 was badly invested in securities and became worthless. Taxpayer’s failure to report excess contributions led to assessment of tax for excess contribution, but he successfully applied for relief and was granted waiver of tax, penalties, and interest in amount of $39,193.08. Taxpayer claimed RRSP deductions in taxation years 2013, 2014 and 2015. Minister reassessed taxpayer on basis that in 2013 he had unused RRSP contributions from prior years of $2,000, which allowance for 2013 reduced balance to nil such that he did not carry forward any unused contributions and could not claim any deductions for 2014 and 2015. Taxpayer appealed. Appeal allowed. Minister’s argument that taxpayer should have paid tax on excess contributions to RRSP and that loss of investments did not impact this requirement to pay tax was not accepted. Minister could not point to any statutory provision allowing her to essentially eliminate unused RRSP contributions by adjusting taxpayer’s total contributions so that it would no longer reflect amount that, due to investment loss, was no longer available to be withdrawn. Minister accepted taxpayer’s relief application with conclusion that his excessive contributions had been eliminated, and this decision was conclusive and binding such that she could not arbitrarily eliminate unused RRSP contributions. There was no legislative provision that prevented taxpayer from claiming RRSP deductions with respect to excess contributions or that allowed Minister to eliminate unused RRSP contributions on basis that they represented excess contributions. Taxpayer had unused RRSP deductions of $23,439 to deduct for 2013, 2014, 2015 and ensuing taxation years. This was long and frustrating battle for taxpayer and, given concern that Minister relied on vague notions of fairness rather than articulating clear legal position, taxpayer would be awarded costs of $1000.

Roy v. The Queen (2019), 2019 CarswellNat 607, 2019 TCC 50, Guy R. Smith J. (T.C.C. [Informal Procedure]).

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