19 July 1989 Administrative Letter 00146 F - Retiring Allowances

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.

Subject: Project November 1507 Retiring Allowances Revision of IT-337R2

We have reviewed version 6 of the draft revision to the above noted bulletin and offer the following comments for your consideration.

We have referred the matter of pre-judgement interest and the reimbursement of legal costs to R.M. Beith in our memo dated October 11, 1988 (copy attached) and have no reason to change our position as reflected in paragraph 7 of this revision.

1)     Paragraph 3(d)

     We suggest that you add the phrase "or loss of employment as the case may be " after "retirement" and change the word "case" to "situation".

2)     Paragraph 4

     In the last sentence, dealing with accumulated vacation pay, there is an implied suggestion that such pay may not be ordinary remuneration uf someone other than the employee terminates the employment which is no the case. We also suggest that the words "5(1) or" be inserted between "subsection" and "6(3)".

3)     Paragraph 7

A)     You may wish to add a comment concerning the application of proposed paragraphs 56(1)(1.1)and 60(o.1) of the Act as introduced by Bill C-28 on June 20, 1989, relating to legal fees incurred in respect of establishing the right to or collecting a retiring allowance.

B)     In our view, reimbursements (other than a reimbursement for legal costs) form part of a retiring allowance.  Accordingly, we suggest you add the following to the end of the second sentence, "as well as the reimbursement of out-of-pocket expenses."

C)     In the third sentence, it says that the reimbursement of legal costs is not considered income and suggests that because of this, the amount does not form part of the retiring allowance.  In our view, the causal relationship is the reverse and we would suggest "However, a reimbursement to a taxpayer for legal costs does not form part of the retiring allowance to the extent ... by the taxpayer, and therefore, is not included in income."

4)     Paragraph 9

     The reference to the bulletin on rights and things should be IT-212R2 rather than IT-212R.

5)     Paragraph 10

     In the Note which discusses pension reform changes, the reference to 1988 should be changed to 1989, based on the Department of Finance Press Releases dated August 19, 1988, and April 27, 1989.

6)     Paragraph 11(a)

     The statement concerning "a person related to an employer" is correct but falls short of that which is stated in subparagraph 60(j.1)(iv) and (v) of the Act.  We think you should also include a reference to a former employer whose business was carried on by the subsequent employer (even if all the assets were not sold) and a previous employer of a retiree whose service therewith is recognized in determining the retiree's pension benefits.

7)     Paragraph 11(d)

     The wording of the first and second sentence is slightly confusing.  We suggest "While the number used in the calculation of 10(ii)(b) above may be a fraction (3.8 in our example), the number of years in respect of which an employer has made contributions cannot.  If the plan..."

8)     Paragraph 13

     While the amount subject to tax may be reduced by a section 217 election, the amount of withholding may not, as the election is filed subsequent to the payment of the retiring allowance.

We trust our comment will be of assistance to you.

M.A.G. Hiltzfor Director GeneralSpecialty Rulings DirectorateLegislative and IntergovernmentalAffairs Branch