26 November 2001 External T.I. 2001-0111195 - RETIRING ALLOWANCE AND RELATED EMPLOYERS

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:		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 		2001-011119
W. C. Harding
November 26, 2001

Dear XXXXXXXXXX:

Re: Retiring Allowance and Related Employers

This is in response to your letter of November 14, 2001, wherein you requested confirmation that your employment service with two employers could be used in calculating the deduction available under the Income Tax Act (the "Act") on the transfer of a retiring allowance to a registered retirement savings plan ("RRSP").

In your letter, you explained that you recently retired from your current employer and that you will be receiving a retiring allowance that you wish to contribute to your RRSP. You worked for your employer from XXXXXXXXXX and again from XXXXXXXXXX. During the period from XXXXXXXXXX, you worked for another employer. However, the pension you will receive as a result of your retirement will be based on all of your years of service with both employers because your years of service with the other employer are being recognized under your current employer's pension plan.

Officers of the XXXXXXXXXX Tax Services Office have advised you that that are eligible to count your years of service before 1996 with both employers when calculating the amount you may transfer to your RRSP. However, the payroll administrators of your employer have advised you that you are only eligible to transfer $2000 per year for each of service from XXXXXXXXXX until 1996.

Your enquiry relates to a proposal to transfer an amount to an RRSP in an actual situation. As noted in Information Circular 70-6R4 (available at your local tax services office or on the internet at http://www.ccra-adrc.gc.ca/E/pub/tp/ic70-6r4eq/ic70-6r4-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 at http://www.ccra-adrc.gc.ca/E/pub/tp/i337r3em/README.html). 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.1) of the Act and all of the service with either employer (before 1996) may be used in calculating the deduction under paragraph 60(j.1). Breaks in service with an employer will not effect the deduction but each calendar year may only be counted once.

We trust this explanation will be of assistance to you.

Yours truly,

Roberta Albert, CA
for Director
Financial Industries Division
Income Tax Rulings Directorate
Policy and Legislation Branch

??