19 April 1990 Ministerial Correspondence 900294 F - Retiring Allowance Policy of a Corporate Client

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.

April 19, 1990

Dear Sirs:

This is in reply to your letter dated March 23, 1990 in which you requested our views concerning a proposed retiring allowance policy for a corporate client.

Specifically, the corporation wishes to implement a policy 24(1)

For your information, as indicated in paragraph 23 of Information Circular No. I.C. 70-6R, we do not give written opinions with respect to proposed transactions.  However, we are prepared to provide you with the following general comments.

It is always a question of fact whether an employee has retired or suffered the loss of an office or employment and, therefore, we find it necessary to review each such case separately.

Paragraph 8 of Interpretation Bulletin No. IT-337R2 (copy enclosed), in part, outlines certain requirements to be satisfied in considering whether an arm's length payment would be considered to be a reasonable retiring allowance, and a deductible outlay to the payer.  Further, it indicated that an advance income tax ruling may be requested with respect to a proposed payment of a retiring allowance.

Generally, an unfunded arrangement for the provision of retiring allowances to employees would not be a "retirement compensation arrangement" within the meaning of that expression in subsection 248(1) of the Income Tax Act.

We trust that our comments will be of assistance to you.

Yours truly,

for DirectorFinancial Industries DivisionRulings Directorate