5 December 1994 Internal T.I. 9428957 - RETIRING ALLOWANCE FROM FARMER TO SPOUSE

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:

Whether amount of retiring allowance proposed to be paid to spouse by farmer is reasonable.

Position TAKEN:

Yes.

Reasons FOR POSITION TAKEN:

Question of fact but meets general requirement that not in excess of amount deductible under 60(j.1) - see E9211150 for reasonableness test for retiring allowance.

				December 5, 1994

	Regina District Office		Head Office
A. R. Kellett		Rulings Directorate
	Director		P. Spice
	Attention:  Ms Tracey Ott		(613) 957-8953

Client Assistance Directorate

				942895

Retiring Allowance from Farmer to Spouse

This is in reply to your facsimile transmission of November 10, 1994, to which you attached a copy of a letter of November 9, 1994, from XXXXXXXXXX. You asked us if the proposed retiring allowance as described in the letter is reasonable in our opinion.

Attached for your information is a copy of an advance ruling concerning a situation similar to the one described in the letter from XXXXXXXXXX. In our view, the amount of the retiring allowance which is proposed to be paid is reasonable in the circumstances. Generally, an amount of a retiring allowance is considered to be reasonable where it does not exceed the amount of the deduction allowed under paragraph 60(j.1) of the Income Tax Act (i.e. where there are no pension or deferred profit sharing plan benefits, $3500 times the number of pre-1989 years, and $2000 for the number of post-1988 years, employed by the payer or a person related to the payer). For a general discussion of the criteria used to determine if a retiring allowance is reasonable, please refer to the summary contained in Question 10 of the 1992 Prairie Tax Conference (copy enclosed).

We trust this information is helpful.

for Director
Financial Industries Division
Rulings Directorate
Policy and Legislation Branch