27 October 1989 Internal T.I. 58647 F - Settlement on Termination of Employment

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.

October 27, 1989

Dear Sirs:

Re:  19(1)

We are responding to your letter of September 7, 1989, requesting confirmation of the tax treatment to be accorded certain payments proposed to be made to 19(1)   as part of the settlement following the cessation of his employment with the 19(1)

The part of the loss of office claim that is of concern to you relates to the amount determined as being in respect of the pension income reduction resulting from the early termination of employment.  Submitted with your letter were schedules which set out the calculation of the projected pension income loss (estimated at 19(1)   per annum).  The proposed settlement will likely provide for the payments to be made by way of an annuity purchased by the employer at the outset.

You gave requested confirmation that

1)

2)     24(1)

3)

The portion of the settlement described in your submission appears to fall within the definition of a Retirement Compensation Arrangement found in subsection 248(1) of the Income Tax Act.  The tax implications under such an arrangement are much different from those associated with retiring allowances. Consequently, we are not prepared to respond definitively to questions raised in connection with a portion of such an arrangement without examining the entire settlement document.

Since the arrangement is not yet a completed transaction you may wish to request an advance ruling in respect of the proposed settlement.  Such a request must be submitted in the manner described in Information Circular IC 70-6R.

Yours truly,

for DirectorBusiness and General DivisionSpecialty Rulings DirectorateLegislative and IntergovernmentalAffairs Branch