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 an employee receive a "retiring allowance" (for purposes of tax-deferred transfer under paragraph 60(j.1)) if he was on an unpaid leave of absence and employed by an unrelated employer overseas at the time that his entitlement to the retiring allowance occurred?
Position: Yes.
Reasons: A person on unpaid leave may at law still be an employee. In any event, there is no requirement in the definition of "retiring allowance" in subsection 248(1) that the amount be paid by a current employer. Residency not relevant for 60(j.1) "years".
XXXXXXXXXX 2000-004602
G. Kauppinen
Attention: XXXXXXXXXX
October 31, 2000
Dear Madam:
Re: Retiring Allowance
This is in reply to your letter which was received on August 29, 2000 requesting our opinion regarding the entitlement of an employee to the tax-deferred transfer in paragraph 60(j.1) of the Income Tax Act ("Act") in respect of a "retiring allowance"(as defined in subsection 248(1) of the Act). The employee was on an unpaid leave of absence and was working for another employer overseas at the time that he became entitled to the retiring allowance.
Further to our telephone discussion on October 24, 2000 (Kauppinen/XXXXXXXXXX) we confirm the following with respect to the tax-deferred transfer:
1. A person on unpaid leave may at law still be in an employment relationship with the person which has granted the unpaid leave notwithstanding that the person on leave may be employed by another arm's length employer during the years of leave.
2. The relevant years for the purposes of the calculation in subsection 60(j.1) are the years that the employee or former employee was employed by the payer of the retiring allowance (or a person related thereto). The resident or non-resident status of the employee or former employee during those years is not relevant to the calculation.
3. A retiring allowance (severance) can be paid by a former employer at any time even if the employment relationship had been severed for an number of years.
We trust our comments will be of assistance to you.
Yours truly,
for Director
Financial Industries Division
Income Tax Rulings Directorate
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