7 November 2001 External T.I. 2001-0107495 - PAY EQUITY SALARY ADJUSTMENTS

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 CCRA.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.

Principal Issues:

Follow-up inquiry to 2001-010064, 2001-010174 and 2001-008535 regarding the interpretation of the definition of qualifying amount in subsection 110.2(1) of the Act. Specifically, whether an "arbitration award" must be the result of a process whereby the "payor and the individual terminate a legal proceeding."

Position:

XXXXXXXXXX , it is now our view that the language of the provision cannot support the interpretation that an "arbitration award" must be the result of a process whereby the "payor and the individual terminate a legal proceeding." The lump sum award, however, must be the result of a bona fide arbitration process.

The revised position will alter the view expressed in the above noted documents. As well, they may impact the view expressed in E 2000-0053225, E 2001-0066357 and

2001-008535

Reasons:

Subsection 110.2(1) definition of qualifying amount.

XXXXXXXXXX 2001-010749

Randy Hewlett, B.Comm.

November 7, 2001

Dear XXXXXXXXXX:

Re: Pay Equity Salary Adjustments - Lump Sum Deduction
Section 110.2 of the Income Tax Act

This is further to our recent telephone conversations and earlier correspondence concerning the above matter, in which you request that we reconsider our interpretation of the definition of qualifying amount in subsection 110.2(1) of the Income Tax Act (the Act), as it relates to your previous correspondence. Your view is that an "arbitration award" does not have to be the result of a process whereby "the payor and the individual terminate a legal proceeding."

After reviewing the matter further, we accept the view that an amount received pursuant to an "arbitration award" is, in itself, a qualifying amount for the purposes of the definition in subsection 110.2(1) of the Act and, further, it is not conditional upon the phrase "the payor and the individual terminate a legal proceeding". However, it is emphasized that the amount so received must be the result of a bona fide arbitration process.

Our opinion should not be taken as a confirmation that the situation described in your correspondence is indeed a bona fide arbitration process. If your situation involves completed or ongoing transactions, further inquiries should be addressed to the relevant Tax Services Office, or otherwise be the subject matter of an advance income tax ruling request.

We trust our comments will be of assistance to you.

Yours truly,

John Oulton, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Legislation Branch