23 February 1993 Income Tax Severed Letter 9237135 - Retiring All

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.

Please note that the following document, although believed
to be correct at the time of issue, may not represent the
current position of the Department.
XXXXXXXXXX 5-923713
M.Shea-DesRosiers
(613) 957-8953
Attention: XXXXXXXXXX

February 23, 1993

Dear Sir:

Re: Retiring Allowances

This is in reply to your letter of November 24, 1992 in which you ask questions concerning retiring allowances. We apologize for the delay in replying to your letter.

Written confirmation of the tax implications inherent in particular transactions are 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 70-6R2, dated September 28, 1990. Where the particular transactions are completed, the enquiry should be addressed to the relevant District Taxation Office. The following comments are, therefore, of a general nature only, and are not binding on the Department.

The definition of "retiring allowance" as found in paragraph 248(1) of the Income Tax Act (the "Act") includes an amount received upon or after retirement from an office or employment in recognition of one's long service or in respect of a loss of office or employment.

It is always a question of fact whether an individual has suffered the loss of an office or employment. However, it is the Department's position that an officer will be considered to have retired or lost an office even though he may continue as a director at nominal compensation (see paragraph 4(a) of IT-337R2). However, if a taxpayer remains as an officer of the corporation, he/she will not be considered to have retired.

The Department mentions, at paragraph 4(b) of Interpretation Bulletin IT-337R2, that a retirement or loss of employment does not include termination of employment (other than mandatory retirement) with an employer followed shortly by employment with an affiliate of the former employer. The question as to whether two corporations are affiliated is a question of fact.

Where a low or no salary was received before retirement and an amount received after retirement can reasonably be considered to be deferred compensation, it is taxable as income from office or employment when received. Such an amount would be included in the individual's income and would not be deductible under paragraph 60(j.1) of the Income Tax Act.

We trust the above comments will be of assistance to you. Yours truly,

for Director
Financial Industries Division
Rulings Directorate