12 February 1990 External T.I. 901500 F - Sick Leave Gratuity Plan

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.

Dear Sirs:

Re :     Sick Leave GratuityPlan. ("SLP")

This is in reply to your letter of July 3, 1990 in respect of the above noted plan.

The definition of a retiring allowance in subsection 248(1) of the Income Tax Act provides that an amount received will be a retiring allowance only when it is received either " …. upon or after retirement of a taxpayer .." or " ... in respect of a loss of an office or employment of a taxpayer ...'

Given this definition, the Department is not able in any manner to concur that a payment out of the SLP to an employee prior to the employee's retirement may be treated as a retiring allowance for the purposes of paragraph 60(j.l) of the Act.

We would also like to note for your information that the provisions of paragraph 60(j.l) provide for the deductibility of retiring allowances paid out of Retirement Compensation Arrangements ("RCA"). Accordingly should the SLP plan be funded and thereby become an RCA, any payments to employees will continue to be deductible on transfer to an RRSP to the extent provided under paragraph 60(j.l).

We regret that our reply could not be more favourable but trust that it adequately explains our position in this matter. You may wish to direct your concerns to the Department of Finance for their consideration.

Yours truly.

for DirectorFinancial Industries DivisionRulings Directorate