25 August 1994 External T.I. 9419625 - OVERPAYMENT OF RETIRING ALLOWANCE

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.

Principal Issues:

Repayment of retiring allowances

Position TAKEN:

Routine

Reasons FOR POSITION:

Routine, new law

				5-941962

XXXXXXXXXX		(613) 957-8953 

Attention: XXXXXXXXXX

August 25, 1994

Dear Sirs:

Re: Overpayment of Retiring Allowance

This is in reply to your letter of July 25, 1994, in which you requested confirmation of the treatment for tax purposes of an overpayment of a retiring allowance where all or a portion of the allowance has been transferred into a Registered Retirement Savings Plan (RRSP).

Subparagraph 60(n)(i.01) was added to the Income Tax Act (the "Act") on June 15, 1994 to permit the deduction in computing income for a year, of any retiring allowances received and included in income in the year or a prior year, to the extent the amount was repaid in the year. The amendment applies to any repayments made after 1990.

Whether a retiring allowance is transferred directly or indirectly to an RRSP, it must be included in income of the retiring employee. It can then be offset by a deduction for the eligible amount transferred at that time. Accordingly, if any portion of the retiring allowance must subsequently be repaid, a deduction under the new provision may be claimed since it was included in income. Furthermore, the Act does not require the repayment to be made out of the RRSP to which it was transferred. Therefore the retiree can leave the amount in the RRSP, make the repayment with other funds and still claim the deduction under subparagraph 60(n)(i.01). However, if the retiree does repay the amount with funds withdrawing from the RRSP those funds must also be included in income as a benefit received from an RRSP in the year.

To make a claim for a repayment of a retiring allowance, a retiree must simply attach a receipt or other supporting document to his or her income tax return and claim the amount as an "Other Deduction". Further explanation of the deduction can be found in the T1 General Tax Guide.

The above comments are based on our understanding of the law as it applies in general and may or may not apply to the circumstances of a particular case. They do not form an advance income tax ruling and they are not binding on the Department.

Yours truly,

for Director
Financial Industries Division
Rulings Directorate
Policy and Legislation Branch