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.
XXXXXXXXXX
Attention: XXXXXXXXXX
Dear Sirs:
RE: Retiring Allowances
This is in reply to your letter of August 30, 1993 wherein you requested our comments concerning the payment of a retiring allowance to a shareholder of a wholly owned corporation on the sale of the corporation's active business.
As stated in paragraph 3 of the Department's Interpretation Bulletin IT337R2, for a payment to be a retiring allowance, it must be paid upon or after retirement or be paid in respect of a loss of an office or employment. However, as stated in paragraph 4 of the Bulletin, retirement or loss of employment does not include a transfer from one office or position to another with the same employer except for the mere continuation as a director at nominal compensation.
When a person continues to be an officer of a corporation the person is not considered to have retired even if the active business of the corporation is discontinued. However, if a shareholder does not continue as an officer but continues to be involved with the operations of a corporation it will be a question of fact whether or not the person has retired. In such cases, a review of the shareholder's involvement with the day to day operations of the corporation must be made. In general, however, we do not consider the investment and reinvestment of funds of an otherwise inactive corporation to be, of and by itself, indicative of a shareholder's continuation of employment.
We trust these comments will be satisfactory to your needs.
Yours truly,
for DirectorFinancial Industries DivisionRulings Directorate
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© Her Majesty the Queen in Right of Canada, 1993
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© Sa Majesté la Reine du Chef du Canada, 1993
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