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: Is a retroactive payment made to employees in respect of a pay equity article of a collective agreement a "qualifying amount" for purposes of section 110.2 of the Act?
Position: No.
Reasons: Per 2001-006635, an arbitration award for purposes of section 110.2 does not include an award as a result of arbitration under normal collective bargaining.
XXXXXXXXXX 2001-007458
J. E. Grisé
March 21, 2001
Dear XXXXXXXXXX:
Re: Lump Sum Payments
This is in reply to your letter of February 22, 2001, requesting our assistance in determining whether retroactive pay equity payments paid by XXXXXXXXXX (the "Employer") to its employees are considered qualifying payments for purposes of form T1198.
As requested, we have considered the situation outlined in your letter and have provided some comments below. However, we cannot confirm the tax implications of particular transactions unless the transactions are proposed and are the subject matter of an advance ruling request submitted in the manner set out in Information Circular 70-6R4. Thus, our comments are of a general nature only.
Facts
XXXXXXXXXX
The term "qualifying retroactive lump-sum payment" as used on form T1198 is based on the provisions in section 110.2 of the Income Tax Act (the "Act"), which provides for the deduction of certain lump-sum payments in computing an individual's taxable income. In the situation outlined in your letter, the main issue appears to be whether the lump-sum payments made by the Employer would qualify under paragraph (a) of the definition "qualifying amount" in subsection 110.2(1) of the Act. Paragraph (a) of the definition describes, among other things, an amount that is received pursuant to an order or judgment of a competent tribunal, an arbitration award or a contract by which the payor and the individual terminate a legal proceeding, and that is included in the computing the individual's income from an office or employment.
In our view, an arbitration award for purposes of section 110.2 of the Act does not include an award received as a result of arbitration under normal collective bargaining. Accordingly, it is our view that lump-sum payment paid by the Employer to its employees are not qualifying amount for purposes of that definition in subsection 110.2(1) of the Act.
We hope our comments are helpful.
Yours truly,
John Oulton, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
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