19 January 1995 Internal T.I. 9433627 - RETIRING ALLOWANCE

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:

Whether an amount qualify as a retiring allowance?

Position TAKEN:

Routine

Reasons FOR POSITION TAKEN:

			January 19, 1995

	Winnipeg District Office	HEAD OFFICE
	Revenue Collections Division		Rulings Directorate
			Robert Gagnon
	Attention: Corinne Webb	(613) 957-8953
	             Technical Advisor
			7-943362

Retiring Allowance

We are writing in response to your memorandum of December 7, 1994, wherein you requested whether a proposed payment by a corporation to an employee would qualify as a retiring allowance. The proposed transactions are described in a letter from XXXXXXXXXX addressed to your district office.

The situation outlined in the letter of XXXXXXXXXX involves actual proposed transactions with identifiable taxpayers. As indicated in Information Circular 70-6R2, we do not express opinions on specified proposed transactions other than as a reply to an advance income tax ruling. Moreover, the Department should not confirm the status of the payment without an examination of the terms of the arrangement because the purpose of the proposed service arrangement seems to have the payment qualify as a retiring allowance while the individual will continue to render in substance services to his employer.

We propose that the reply to XXXXXXXXXX be as follows:

The situation outlined in your letter appears to involve actual proposed transactions with identifiable taxpayers. As indicated in Information Circular 70-6R2, the Department does not express opinions on specified proposed transactions other than as a reply to an advance income tax ruling. Requests for advance income tax rulings must be addressed to Rulings Directorate. While we are unable to comment on the income tax consequences attendant on the specific facts described in your letter, the following general comments may be of assistance to you.

Retiring allowance is defined in subsection 248(1) of the Income Tax Act ("Act") to mean an amount received upon or after retirement from an office or employment in recognition of one's long service, or in respect of a loss of office or employment. As noted in paragraph 6 of Interpretation Bulletin IT-337R2, a payment in respect of loss of office or employment usually refers to the elimination or expiration of a particular office or employment. A loss of office or employment does not usually encompass retirement.

It is a question of fact whether an individual has retired where he resigns from his employment but renders the same services that he has rendered as an employee to his former employer under a new arrangement. In the case Edward Shell and Robert Horta v. MNR 82 DTC 1369 (TRB), the Board decided that the taxpayer was not retired in similar circumstances.

Chief
Financing, Leasing & Plans Section
Financial Industries Division
Rulings Directorate