14 February 2000 2000-0005326 - LOSS OF EMPLOYMENT-SALARY TOP-UP

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 ISSUE:

What is the nature of the XXXXXXXXXX payment made by XXXXXXXXXX to top up the salary of employees XXXXXXXXXX ?

Position:

Employment income

Reasons:

Application of paragraph 6(3) of the Act.

			February 14, 2000

HEADQUARTERS HEADQUARTERS
Trust Accounts Division Financial Industries
Policy and Technical Services Section Division
L. J. Roy, CGA
Attention: Peter Pustay
2000-000532

XXXXXXXXXX

This is in reply to your memorandum of January 28, 2000, wherein you requested our views in respect of the nature of XXXXXXXXXX payments made by XXXXXXXXXX.

FACTS

XXXXXXXXXX

Question

Whether the XXXXXXXXXX payment qualifies as a retiring allowance. If not, what is the nature of the payment.

Comments

To qualify as "retiring allowance" as defined under subsection 248(1) of the Income Tax Act ("Act") the payment must be in recognition of the taxpayer's long service or in respect of a loss of office or employment.

XXXXXXXXXX. In consequence, it is our view that the payment is not made in recognition of long service or in respect of a loss of office or employment. Therefore, it does not qualify as retiring allowance.

Paragraphs 6(3)(b) and (e) of the Act provide that an amount received by a person in satisfaction of an obligation arising out of an agreement made by that person and the payer immediately prior to, during or immediately after a period when the person was employed by the payer, is deemed, for the purposes of section 5, to be remuneration for the person's services rendered during the period of employment unless it cannot reasonably be regarded as having received in consideration or partial consideration for a covenant with reference to what the employee is, or is not, to do before or after the termination of employment.

It is our view that the XXXXXXXXXX payments XXXXXXXXXX would be deemed by subsection 6(3) of the Act to be employment income under section 5 of the Act.

For your information, a copy of this memorandum will be severed using the Access to Information Act criteria and placed in the Legislation Access Database (LAD) on the Department's mainframe computer. A severed copy will also be distributed to the commercial tax publishers for inclusion in their databases. The severing process will remove all material that is not subject to disclosure including information that could disclose the identity of the taxpayer. Should your client request a copy of this memorandum, they can be provided with the LAD version or they may request a copy severed using the Privacy Act criteria which does not remove client identity. Requests for this latter version should be made by you to Jackie Page at (819) 994-2898. The severed copy will be sent to you for delivery to the client.

We hope that our comments are of assistance.

Manager
Financial Institutions Section
Financial Industries Division
Income Tax Rulings Directorate

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