22 September 1993 Income Tax Severed Letter 9324715 - Retiring Allowance Rollover to an RRSP

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. Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

                                           5-932471
XXXXXXXXXX                                 D. S. Delorey
                                           (613) 957-8953

Attention: XXXXXXXXXX

September 22, 1993

Dear Sirs:

This is in reply to your facsimile transmission of August 30, 1993.

You describe in your letter a set of facts relating to an amount to be received by one of your clients from a receiver/agent appointed by a financial institution who took over the administration and operation of his employer as a result of a default on a loan. You ask us to confirm that the amount qualifies for "rollover" to a registered retirement savings plan ("RRSP") under paragraph 60(j.1) of the Income Tax Act (the "Act").

Written confirmation of the tax implications inherent in a particular set of facts is given by this Directorate only where the facts relate to a proposed transaction that is the subject matter of an advance ruling request submitted in the manner set out in Information Circular 70-6R2. We offer, however, the following general comments.

Whether or not an amount is a "retiring allowance" within the meaning given to that term in subsection 248(1) of the Act is a question of fact. Accordingly, the determination can be made only on a case-by-case basis. Where an amount that otherwise qualifies as a retiring allowance is paid by someone other than the employer, the fact that it was not paid by the employer will not of itself disqualify the amount as a retiring allowance.

Paragraph 60(j.1) of the Act, however, provides for a deduction only where the retiring allowance is paid by an employer. Thus, where someone other than the recipient's employer pays a retiring allowance, the deduction under paragraph 60(j.1) would be available only if the other person could be said to be making the payment on behalf of the employer. This in our view would normally be the case where a financial institution takes over the administration of an employer as a result of a default on a loan and pays an amount in settlement of a retiring allowance owed by the employer. However, all relevant facts would have to be known in order to make a determination. We are prepared to consider the matter further if submitted as an advance ruling request.

Where a person pays a retiring allowance on behalf of an employer by direct transfer to the individual's RRSP, no withholding would be required by the payer on the portion of the retiring allowance that qualifies for rollover under paragraph 60(j.1) of the Act. The procedures for completing the tax deduction waiver form are outlined in Information Circular 79-8R3.

Our comments are an expression of opinion only and are not binding on the Department as explained in paragraph 21 of Information Circular 70-6R2. We trust, however, that they are of assistance.

Yours truly,

for Director Financial Industries Division Rulings Directorate

HAA 7278-1