13 April 2000 External T.I. 2000-0011565 - RETIRING ALLOWANCE YEARS OF SERVICE

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: Can taxpayer consider years of service with former employer when calculating the formula in subparagraph 60(j.1)(ii)?

Position: Question of fact

Reasons: Must meet the requirements of 60(j.1)(ii)- former employer must be the same employer (i.e. all federal departments for whom Treasury Board is considered the employer) or related by virtue of 251, 60(j.1)(iv) or (v)

XXXXXXXXXX 		2000-001156
S. E. Thomson
Attention:  XXXXXXXXXX 

April 13, 2000

Dear XXXXXXXXXX:

Re: Transfer of Retiring Allowance under paragraph 60(j.1) of the Income Tax Act

This is in reply to your letter of March 2, 2000 in which you ask for confirmation that a specific taxpayer may consider years of service with the Canadian Armed Forces and the XXXXXXXXXX for purposes of a transfer of his retiring allowance to his RRSP under the provisions of paragraph 60(j.1) of the Income Tax Act (the "Act").

We are unable to definitively reply to a request involving a proposed transaction contemplated by a specific taxpayer except in the context of an advance income tax ruling request, submitted in the manner set out in Information Circular 70-6R3 Advance Income Tax Rulings. However, we are able to offer the following general comments on the relevant provision of the Act which may or may not apply in your situation. As such, these comments are not binding on the Canada Customs and Revenue Agency.

Pursuant to clause 60(j.1)(ii)(A) of the Act, a taxpayer may transfer to his RRSP a portion of his retiring allowance equal to $2,000 per year for years before 1996 during which the taxpayer was employed by the employer or a person related to the employer. It is our general position that employers that are controlled by Her Majesty in Right of Canada, including employers that are agents of the Crown, will be related to one another. Whether or not the employer is controlled by Her Majesty in Right of Canada may be confirmed by the employers.

As set out in subparagraph 60(j.1)(v), for purposes of paragraph 60(j.1) of the Act, a "person related to the employer" includes a previous employer of the retiree whose service therewith is recognized in determining the retiree's pension benefits. This means that at the time the retiring allowance is paid to the employee, the employee must be entitled to benefits under the current employer's pension plan which relate to all or any portion of the years of service with the former employer. This usually occurs when the employee has bought back service with a former employer under the current pension plan, for example, by transferring an amount from the former pension plan to the current pension plan. Whether a retiree's service with a previous employer is recognized in determining his pension benefits is a question of fact which may be settled by the retiree's pension administrator.

Also for purposes of paragraph 60(j.1), as set out in subparagraph 60(j.1)(iv) of the Act, a "person related to the employer" includes any person whose business was acquired or continued by the employer.

As provided by subsection 100(3.2) of the Income Tax Regulations, no withholdings are required on that portion of a retiring allowance that has been transferred to an RRSP by virtue of subparagraph 60(j.1)(ii).

We trust that we have been of some assistance.

Yours truly,

P. Spice
for Director
Financial Industries Division
Income Tax Rulings Directorate
Policy and Legislation Branch