15 August 1989 Administrative Letter 74116 F - Retiring Allowances

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.

Subject:  24(1) and 19(1) Your File: HAK-4940-1 RE-2083 (J.W. Oatway)

This is in reply to your memorandum of July 6, 1989 in respect of the above-noted subject.

In summary, 19(1)

21(1)(b)

21(1)(a)

The fact that the employer's discontinuance of operations may only be temporary is in our view of no significance by itself in characterizing the payment.  The proper test to be applied is whether or not 19(1) have any form of agreement where under he must be "rehired" upon a subsequent re-start of the company's operations.  When such an agreement does not exist, the payment could, subject to our comments below, properly be considered a retiring allowance.

The determination of whether or not an amount is a bonus for fulfilling obligations and not a retiring allowance will, in our opinion, depend upon an analysis of all of the factors relevant to the case.  Such factors could be the reasonableness of the amount(s) paid in relation to the serviced performed, the basis on which an amount is calculated and the contractual obligations of the employee (as discussed above).  All factors must be considered together to arrive at a conclusion.

21(1)(b)

Yours truly,

for DirectorFinancial Industries DivisionRulings Directorate