25 January 1999 External T.I. 9816985 - 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: Meaning of "retired" for retiring allowance

Position: retirement occurs when employment duties in a business cease

Reasons: IT-337R3, paragraph 3 and ATR-12

XXXXXXXXXX 			981698
G. Kauppinen
Attention:  XXXXXXXXXX 

January 25, 1999

Dear Sirs:

Re: Retiring Allowance

This is in reply to your letters dated June 17 and December 10, 1998, and January 12, 1999 wherein you requested our opinion as to when an individual would be considered to have “retired” for the purposes of the definition of “retiring allowance” contained in subsection 248(1) of the Income Tax Act (the “definition”).

Your question appears to relate to a specific proposed transaction and therefore should be the subject of a formal request for an advance income tax ruling . We may, however, provide the following general comments which are not binding on the Department.

As stated in paragraph 4 of Interpretation Bulletin 337R3 entitled Retiring Allowances (“IT-337R3”), whether an individual has retired is a question of fact. However, in the absence of other factors, where an individual ceases to perform employment duties relating to an active business carried on by a corporation (the “vendor corporation”) is our opinion that he or she will be considered to have “retired” for the purposes of the definition . If the active business continues to be carried on by another corporation (the “purchaser corporation”) in a building which it rents from the vendor corporation and the only duties that the individual now performs for the vendor corporation are limited and relate to the rental of the building, our opinion above would not be changed (assuming the individual is not employed by the purchaser corporation in respect of the active business). Please refer to in subparagraph 3(c) of IT-337R3 in regard to the foregoing.

In addition, it should be noted that ATR-12 dated October 27, 1986 states our interpretation of the definition in the context of a fact situation similar to that described in your letter.

We trust our comments are of assistance.

Yours truly,

Paul Lynch
for Director
Financial Industries Division
Income Tax Rulings
and Interpretations Directorate
Policy & Legislation Branch