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:
Amounts paid to former employees to compensate for the reduction in the value of their homes as a result of XXXXXXXXXX
Position:
The amounts are taxable as employment income or as a retiring allowance.
Reasons:
Basic position in IT-337R2 and similar to another case previously examined by Rulings.
February 20, 1997
Ms Colette Paquette Technical Review and
Problem Resolution Remissions Section
Sudbury Tax Services Office Jacques E. Grisé
957-2059
964115
Housing and Rental Subsidy
This is in reply to your memorandum of December 9, 1996 concerning certain payments made by XXXXXXXXXX to its former employees.
XXXXXXXXXX Through an agreement negotiated by their union, the employees XXXXXXXXXX were offered a severance package that included a housing and rental subsidy. This subsidy was payable as a fixed, one-time cash disbursement, the quantum being determined by reference to the years of service and the estimated loss in value of housing developed by a prominent real estate agency and submitted to the employer. The Federal Court of Appeal concluded that the subsidy was not "earnings" for the purposes of allocation under subsection 58(1) of the Regulations passed pursuant to the Unemployment Insurance Act.
In our view, the amounts received by the former employees as a housing and rental subsidy arose out of or in consequence of the termination of employment and as such should be included as income from that employment under subsection 5(1) of the Income Tax Act, or as a retiring allowance under subparagraph 56(1)(a)(ii) of the Act. Please refer to Interpretation Bulletin IT-337R2 for further information. It is also possible that the amounts in question could be viewed as benefits of any kind whatever set out in 6(1)(a) of the Act or as allowances for personal or living expenses or as an allowance for any other purpose set out in paragraph 6(1)(b) of the Income Tax Act.
The housing and rental subsidy received by the former employees is not a reimbursement and, accordingly, paragraph 37 of Interpretation Bulletin IT-470R cannot have any application.
John F. Oulton
Section Chief
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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