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:
The tax treatment of a settlement payment of $XXXXXXXXXX to be paid, pursuant to a Memorandum of Agreement ("MOA"), by Public Works and Government Services Canada to a former employee of the Federal Government.
Position TAKEN:
Question of fact, but based on the limited information provided, our initial reaction is that this settlement of $XXXXXXXXXX would fall within the ambit of a "retiring allowance" as defined in subsection 248(1).
Reasons FOR POSITION TAKEN:
This settlement appears to be "an amount ...received....in recognition of the taxpayer's long service, or...in respect of a loss of an office or employment of a taxpayer, whether or not received as, on account or in lieu of payment of, damages or pursuant to an order or judgement of a competent tribunal", as the MOA indicates, in part, that the former employer agrees to pay the former employee $XXXXXXXXXX inclusive of severance monies less all necessary statutory source deductions, in consideration for the withdrawal of the former employee's grievance against his former employer and the resignation of the former employee effective XXXXXXXXXX .
Mr. André Rioux
Public Works and
Government Services Canada 2000-004848
Compensation Sector M. Azzi
Place du Portage, Phase III-10A2
11 Laurier Street
Hull, Quebec
K1A 0S5
October 10, 2000
Dear Sir:
Re: Settlement Payment
This is in reply to your letter of September 22, 2000, wherein you request our views on the tax treatment of a settlement payment of $XXXXXXXXXX to be paid, pursuant to a Memorandum of Agreement ("MOA") dated XXXXXXXXXX, by Public Works and Government Services Canada to a former employee of the Federal Government.
Generally, a damage settlement received by an individual, from the individual's employer or former employer, is either employment income, a retiring allowance or non-taxable damages. Such a determination is a question of fact which requires a review of all relevant facts and documentation of each particular case, including the statement of claims/grievances, relevant correspondence between the parties, the settlement agreement or court order and, where relevant, the employment contract. In the above situation, we were provided with the settlement agreement (i.e., the MOA) only, and were advised that no other information was available. Accordingly, as discussed (Azzi/Rioux), we caution that our views are based on the very limited information provided.
The MOA indicates, in part, that the former employer agrees to pay the former employee $XXXXXXXXXX inclusive of severance monies less all necessary statutory source deductions, in consideration for the withdrawal of the former employee's grievance against his former employer and the resignation of the former employee effective XXXXXXXXXX. Without the benefit of reviewing any other relevant documentation, our initial reaction is that this settlement of $XXXXXXXXXX would fall within the ambit of a "retiring allowance" as defined in subsection 248(1) of the Income Tax Act. That is, this settlement appears to be "an amount ...received....in recognition of the taxpayer's long service, or...in respect of a loss of an office or employment of a taxpayer, whether or not received as, on account or in lieu of payment of, damages or pursuant to an order or judgement of a competent tribunal".
We trust that these comments will be of assistance.
Yours truly,
Jim Wilson
for Director
Business and Publications Division
Income Tax Rulings Directorate
Policy and Legislation Branch
??
- 2 -
All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5
© Her Majesty the Queen in Right of Canada, 2000
Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistributer de l'information, sous quelque forme ou par quelque moyen que ce soit, de facon électronique, méchanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.
© Sa Majesté la Reine du Chef du Canada, 2000
Email this Content