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.
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.
Principal Issues: For purposes of 60(j.1) of the Act, can a taxpayer who is going to receive a retiring allowance from a province also include his years of service with a municipality located in that province in determining the amount that can be rolled over?
Position: No, unless the municipality qualifies as a related employer under 60(j.1)(iv) or (v).
Reasons: The incorporated municipality is not related to (controlled by) the province as contemplated by paragraph 251(2)(b) of the Act.
XXXXXXXXXX 2000-001707
M. P. Sarazin
May 29, 2000
Dear Sir:
Re: Related Employers for a Retiring Allowance Rollover
This is in response to your letter of March 17, 2000, in which you ask if your years of service with a municipality (the "City") could be counted in determining the amount of your retiring allowance from your current employer which is eligible for a rollover under paragraph 60(j.1) of the Income Tax Act (the "Act"). Your current employer is the province in which the City is located (the "Province") and we understand that the City is incorporated without share capital under a statute of the Province.
You commenced employment with the Province in 1969 and you will be receiving a retiring allowance in 2001. Prior to being employed by the Province, you were employed as a temporary employee of the City for various periods between June, 1965 and September, 1969. You would like to know whether the City and the Province are related employers for purposes of determining the number of years that are eligible for the calculation of the amount of the retiring allowance that could be rolled to a registered retirement savings plan ("RRSP") under paragraph 60(j.1) of the Act.
In your letter you have outlined what is an actual fact situation related to proposed transactions. As noted in Information Circular 70-6R3 (available at your local tax services office or on the internet at www.ccra-adrc.gc.ca/formspubs/menu-e.html), this directorate can only provide an opinion concerning the tax consequences associated with specific proposed transactions in the form of an advance income tax ruling. Consequently, we can only provide you with the following general comments.
The Canada Customs and Revenue Agency (the "Agency") has provided its general views regarding retiring allowances in the enclosed Interpretation Bulletin IT-337R3. You will note that paragraph 12 of IT-337R3 discusses the computation of the amount of retiring allowance that may be transferred to an RRSP under paragraph 60(j.1) of the Act. In addition, paragraph 13(b) discusses how employers that are not related under section 251 of the Act may be considered related for purposes of paragraph 60(j.1) of the Act by virtue of subparagraphs 60(j.1)(iv) and (v) of the Act.
Since the statute under which the City is incorporated does not cause the City to be controlled by the Province through the Province's ownership of a majority of the City's shares and neither the statute or the facts suggest that the Province has the ability to otherwise control the City's affairs, they are not related under section 251 of the Act. The only other way that you will be able to count your years of service with the City in determining the amount of the retiring allowance that may be transferred to an RRSP is if the Province 's pension plan pays you a pension based on your years of service with both the City and the Province.
We trust the above comments will be helpful.
Yours truly,
Patricia Spice
for Director
Financial Industries Division
Income Tax Rulings Directorate
ENCLOSURE
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