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: Can a retiring allowance that is made pursuant to a wrongful dismissal suit be paid out in instalments even though the employee did not request the payment option on or before the date the employment is terminated.
Position: Yes, provided the payment of the retiring allowance in instalments is made pursuant to the terms of the settlement agreement or the terms of an order or judgment of a competent tribunal.
Reasons: The retiring allowance is not payable to the employee until the settlement agreement or order or judgment of the tribunal is made, so the position would be similar to our position in paragraph 8 of IT-337R3.
XXXXXXXXXX 1999-000856
M. P. Baldwin
Attention: XXXXXXXXXX
February 9, 2000
Dear Sirs:
Re: Retiring Allowance in Instalments
This is in reply to your facsimile of November 23, 1999 requesting an interpretation with respect to the payment of a retiring allowance in a settlement of a wrongful dismissal suit. In particular, you wish to know if the retiring allowance can be paid out in instalments over a period of years.
It appears that the fact situation in your facsimile relates to a proposed transaction to be undertaken by a specific taxpayer and therefore, we bring to your Information Circular 70-6R3 dated December 30, 1996, issued by the Canada Customs and Revenue Agency ("CCRA" - formerly Revenue Canada). Confirmation of tax consequences with respect to proposed transactions involving specific taxpayers will only be provided in response to a request for an advance income tax ruling. If you wish to obtain an advance income tax ruling, a written request can be submitted in accordance with the Information Circular. Nevertheless, we can provide you the following general comments which are not binding on the CCRA.
As noted in paragraph 9 of Interpretation Bulletin IT-337R3, a retiring allowance includes an amount received in respect of a loss of an office or employment of a taxpayer, whether or not received as, on account or in lieu of payment of, damages or pursuant to an order or judgment of a competent tribunal.
Therefore, in our opinion, when an amount is received as a consequence of the settlement of a wrongful dismissal suit in respect of the loss of employment , this retiring allowance may be paid out in instalments provided the payment of the instalments is made pursuant to the terms of the settlement agreement.
We trust our comments will be assistance to you,
Yours truly,
Patricia Spice
for Director
Financial Industries Division
Income Tax Rulings Directorate
Policy & Legislation Branch
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