The Appellant appealed an assessment of Part X.1 tax and penalties for RRSP over-contributions in the 2015 taxation year.
The Appellant argued that a $165,000 termination payment received in 2014 constituted "earned income," which would have provided sufficient contribution room.
The Tax Court of Canada held that the termination payment was a "retiring allowance" and not income from employment, meaning it did not qualify as earned income.
However, the Court found errors in the Minister's calculation of the over-contribution tax, noting the contribution was made in February rather than January and that additional contribution room was available.
The appeal was allowed in part, and the matter was referred back to the Minister to reduce the tax from $1,106.28 to $682.33 and the penalty from $188.07 to $116.
