1 February 2005 External T.I. 2005-0112771E5 - Paragraph 60(j.1) Transfer

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.

Principal Issues: When is the additional $1,500 rollover of a retiring allowance available?

Position: In general, the additional $1,500 transfer is available for each year or part year that a taxpayer was employed by the employer prior to 1989 for which the employer's contributions to a RPP or DPSP had not vested in the taxpayer at the time the retiring allowance is paid.

Reasons: Provisions of paragraph 60(j.1) of the Act.

Kelly Murphy
National Defence Headquarters
305 Rideau Street, 2nd Floor 2005-011277
Constitution Building G. Allen
Ottawa ON K1A 0K2

February 1, 2005

Dear Mr. Murphy:

Re: Calculation of the Eligible Portion of a Retiring Allowance

This letter is in reply to your facsimile dated January 21, 2005 and further to Gary Allen's voice-mail message of January 26, 2005, concerning the above-referenced issue. Specifically, you enquire whether a member of the Canadian Forces would be entitled to the additional $1,500 rollover of a retiring allowance in respect of the year 1973, during which the member was employed with the Canadian Forces and is not entitled to any pension benefit in respect of that year.

Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R5, Advanced Income Tax Rulings, dated May 17, 2002. Where the particular transactions are completed, the inquiry should be addressed to the relevant tax services office. The following comments are, therefore, of a general nature only and are not binding on the Canada Revenue Agency ("CRA"). All publications referred to herein can be accessed on the CRA website at the following address: http://www.cra-arc.gc.ca/tax/technical/incometax/menu-e.htm l.

Our Comments

Subparagraph 60(j.1)(ii) of the Income Tax Act (the "Act") limits the amount that may be deducted in respect of the transfer of a retiring allowance to a registered retirement savings plan (RRSP) to the total of:

a) $2,000 times the number of years before 1996 during which the retiree was employed by the employer or a person related to the employer; and

b) $1,500 times

(i) the number of years before 1989 during which the retiree was employed by the employer or a person related to the employer, minus

(ii) the equivalent number of years before 1989 in respect of which contributions to a pension plan or a deferred profit sharing plan by the employer or a person related to the employer vested in the retiree at the time the retiring allowance is paid.

In general, an additional $1,500 may be transferred to an individual's RRSP for each year or part year the individual was employed by the employer prior to 1989 for which the employer's contributions to a registered pension plan had not vested in the employee at the time the retiring allowance is paid.

As a result, in the situation described above where the member was employed by the Canadian Forces in 1973 and not entitled to a pension benefit in respect of that year, the member would be entitled to the additional $1,500 rollover in respect of the year 1973.

We trust the above comments will be of assistance.

Yours truly,

Roberta Albert, CA
Manager
Financial Industries Division
Income Tax Rulings Directorate
Policy and Planning Branch