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: Are two employers considered related for the purposes of paragraph 60(j.1) of the Act where a taxpayer's service with the two employers is recognized in determining his or her pension benefits under an RPP?
Position: Yes.
Reasons: The employers are related under subparagraph 60(j.1)(v) of the Act.
XXXXXXXXXX 2000-002443
M. P. Sarazin
Attention: XXXXXXXXXX
August 18, 2000
Dear Sirs:
Re: Retiring Allowance and Related Employers
This is in response to your letter of May 5, 2000, wherein you requested confirmation that an individual's two former employers would be related to the individual's current employer for purposes of paragraph 60(j.1) of the Income Tax Act (the "Act").
An individual previously employed by your office has retired and you are processing a retiring allowance payment for the individual. The individual had fourteen years of service with the XXXXXXXXXX (the "Former Employer") before joining your office. The individual transferred his or her pension entitlements under the Former Employer's registered pension plan to your registered pension plan and his or her service with the Former Employer is being recognized in computing his or her pension benefits under your registered pension plan.
You have asked whether the individual's years of service with the Former Employer can be included in the determination of the amount of retiring allowance that is eligible for rollover under paragraph 60(j.1) of the Act. If the answer to your first question is yes, you have asked why this individual would be treated differently from an individual who worked for the Former Employer who chose not to transfer his or her pension entitlements under the Former Employer's registered pension plan to your registered pension plan.
In your letter you have outlined what is an actual fact situation related to proposed transactions. As noted in Information Circular 70-6R3 (available at your local tax services office or on the internet at www.ccra-adrc.gc.ca/formspubs/menu-e.html), this directorate can only provide an opinion concerning the tax consequences associated with specific proposed transactions in the form of an advance income tax ruling. Consequently, we can only provide you with the following general comments.
The Canada Customs and Revenue Agency (the "Agency") provides its general views regarding retiring allowances in Interpretation Bulletin IT-337R3 (available at your local tax services office or on the above noted internet site). Paragraph 13(b) of IT-337R3 deals specifically with the determination of whether employers are related. Where an employer's pension plan provides an employee with benefits in respect of the employee's service with a previous employer, the employers will be related for the purposes of paragraph 60(j) of the Act. Unless the employers are related under section 251 or subparagraph 60(j.1)(iv) of the Act, the employers will not be related for purposes of paragraph 60(j.1) of the Act if the employee's service with the previous employer is not recognized in determining his or her pension benefits.
We trust these comments will be of assistance.
Yours truly,
P. Spice
for Director
Financial Industries Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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