Roy v. R. – TCC: RRSP over-contributions not eliminated by loss on investments in RRSP

Roy v. R. – TCC:  RRSP over-contributions not eliminated by loss on investments in RRSP

https://decision.tcc-cci.gc.ca/tcc-cci/decisions/en/item/365062/index.do

Roy v. The Queen (March 5, 2019 – 2019 TCC 50, Smith J.).

Précis:   The taxpayer had over-contributed to his RRSP commencing in 2006.  By 2012 he had lost much of his investments and closed the RRSP account.  In 2013 his initial assessment indicated that he had a deduction limit of $3,298 for 2013 and $23,439 of unused RRSP contributions available for 2014.  By a subsequent notice of reassessment CRA notified the taxpayer this his unused RRSP contributions for 2013 were limited to $2,000 and reassessed 2013, 2014 and 2015 consequentially.  He appealed these reassessments.  The taxpayer also applied for and received in 2015 relief in respect of his prior over-contributions.

While the case is factually complex it seems to have boiled down to CRA’s position that Mr. Roy had no contribution carryforward in excess of $2,000 in 2013 since the investments in his original RRSP were worth nothing at the end of 2012 and he had never paid tax on his over-contributions because of the relief granted to him in 2015.

The Court rejected CRA’s position holding there was no statutory basis for such an adjustment.  In addition, the Court awarded $1,000 in costs to Mr. Roy, notwithstanding the fact that this was an informal procedure appeal.

Decision:   The Court was succinct in rejecting CRA’s interpretation:

[21]  The Respondent concludes by indicating that the “Appellant never paid taxes under Part X.1 for the excess contribution” and that it “would be unfair for this Court to allow him to reduce his taxable income in future years while never having paid taxes on the excess contribution as taxable income.” (My Emphasis).

[22]  This is a curious argument since the Respondent acknowledges that there is no legislative provision that specifically prevents a taxpayer from claiming RRSP deductions with respect to excess contributions (provided they are within the “RRSP deduction limit”) and the Respondent has failed to point to any legislative provision that would allow the Minister to eliminate unused RRSP contributions on the basis that they represent excess contributions.

[23]  Moreover, the Respondent must know that the Court does not make decisions on the basis of fairness (Barel v The Queen, 2009 TCC 156 and Lapierre v The Queen, 2019 TCC 18) and that its role is not to “interpret taxation provisions in a tendentious or result-oriented way to enhance the federal treasury” (Quinco Financial Inc. v. Canada, 2014 FCA 108, para. 9).

[24]  I therefor conclude that there is no legal basis for the Minister’s reassessment. As a result, I find that the Appellant had unused RRSP deductions of $26,737 in 2012. Having claimed a deduction of $3,298 for the 2012 taxation year, I find that the Appellant had unused RRSP contributions of $23,439 to deduct for the 2013, 2014, 2015 and ensuing taxation years. This would include the $2,000 allowance referenced above.

[25]  This has been a long and frustrating battle for the Appellant, to put it mildly. In his written submissions, he requests various measures against the CRA, including penalties and compensation for “lost opportunity costs”, all of which relate to CRA conduct and are tantamount to damages that this Court does not have the jurisdiction to award.

[26]  However, the Court does have the authority to award costs in this appeal. In this instance, the Court is particularly concerned that the Respondent has not been able to articulate a clear legal position and has relied on vague notions of fairness. The Court is especially concerned that CRA’s accounting of the Appellant’s RRSP contributions (requested at the conclusion of the hearing) was again clearly erroneous in that it failed to reflect the contributions made in 2006.

[27]  As a result of the foregoing, and in the exercise of its discretionary powers, the Court hereby awards costs against the Respondent fixed in the amount of $1,000 (inclusive of any disbursements) payable forthwith.