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: Where an employer buys out an automobile lease and transfers the ownership of the automobile to an employee as part of the employee's termination package on retirement or loss of employment, will the fair market value of the automobile qualify as part of the employee's retiring allowance?
Position: Yes.
Reasons: Where property is received is part of the severance package on termination of employment, the fair market value of the property is considered part of the retiring allowance received by the employee.
January 20, 2000
HEADQUARTERS HEADQUARTERS
André Potvin M.P. Sarazin
Director 824-5441
Trust Accounts Division
Attention: Pauline Nadeau
2000-000024
Retiring Allowances
We are writing to you in respect of your E-Mail dated January 4, 2000, wherein you requested our comments regarding the inclusion of the fair market value of an automobile in an employee's retiring allowance.
The employer currently leases an automobile that is provided to an employee. The benefits associated with the use of the leased automobile have always been reported as a taxable benefit provided by the employer to the employee. The employee's employment with the employer is being terminated and the employer has agreed to transfer the ownership of the automobile that is used by the employee to the employee as part of the employee's severance package. In order to accomplish this, the employer will acquire the automobile by paying off the lease related to the automobile and it will transfer the ownership of the vehicle to the employee.
"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 previously taken the position that the fair market value of specific property (e.g., shares, jewelry, life insurance policies) 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 fair market value of an automobile that is transferred to an employee as part of the employee's severance package resulting from a loss of employment or in recognition of long service on the employee's retirement would be treated in the same manner as the above properties and would be considered part of the employee's retiring allowance for purposes of the Act.
Patricia Spice
for Director
Financial Industries Division
Income Tax Rulings Directorate
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