7 February 2000 External T.I. 2000-0003955 - DISCOUNT AS 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: On retirement, will the amount of a discount from fair market value offered to the retiring employee on buy-out of an employer-leased automobile qualify as a retiring allowance?

Position: Yes.

Reasons: The fair market value of any benefit received in respect of long service will qualify as a retiring allowance for purposes of the Act.

XXXXXXXXXX 2000-000395
M. P. Sarazin
Attention: XXXXXXXXXX

February 7, 2000

Dear Sirs:

Re: Automobile Benefit Qualifying as a Retiring Allowance

This is in response to your letter dated January 21, 2000, wherein you requested a ruling on whether the payment in the form of a discount offered to certain employees on the acquisition of an automobile on retirement would qualify as a retiring allowance.

The employer has instituted a policy since XXXXXXXXXX, whereby employees who have been provided with a company-paid automobile may, upon retirement, purchase the automobile at a discount from fair market value. The discount is decided by the employer's President within a minimum of XXXXXXXXXX% and a maximum of XXXXXXXXXX% for each year of employee service. The first eligible employee retired in 1999 and, for reporting purposes, you would like to know whether the discount qualified as a retiring allowance.

Comments

In your letter you have outlined what appears to be an actual fact situation related to completed 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 advance income tax rulings in respect of specific proposed transactions. We must advise you that the review of completed transactions falls within the responsibility of tax services offices. Consequently, we can only provide you with the following general comments.

"Retiring allowance" is defined in subsection 248(1) of the Income Tax Act (the "Act") to include an amount received on or after retirement of a taxpayer in recognition of the taxpayer's long service or in respect of a loss of an office or employment of a taxpayer. "Amount" is defined in 248(1) of the Act to mean money, rights or things expressed in terms of the amount of money or the value in terms of money of the right or thing.

Since the definition of amount includes the value in terms of money of a right or thing, we have taken the position that the fair market value of specific property received on or after retirement or in respect of a loss of office or employment would be considered part of the employee's retiring allowance and would be included in the employee's income under subparagraph 56(1)(a)(ii) of the Act. We are of the view that the discount from fair market value which reduces the employee's purchase price in respect of an automobile provided to an employee on or after his or her retirement in recognition of his or her long service with the employer would be considered part of the employee's retiring allowance for purposes of the Act.

We trust the above comments will be of assistance to you.

Yours truly,

Patricia Spice
for Director
Financial Industries Division
Income Tax Rulings Directorate
Policy & Legislation Branch