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 an amount is a retiring allowance?
Position TAKEN:
Routine
Reasons FOR POSITION TAKEN:
5-943097
XXXXXXXXXX Robert Gagnon
January 11, 1995
Dear Sirs:
Re: Salary Continuance
This is in reply to your letter of November 21, 1994 wherein you requested whether salary continuation payments could be treated for tax purposes as a retiring allowance.
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 ruling request. Where the particular transactions are completed, as in your case, the enquiry should be addressed to the relevant District Office. However, we can offer you the following general comments which may be of assistance to you.
Where a taxpayer has been informed that his services will no longer be required as of a certain date but that he will continue to receive his regular salary and fringe benefits (including pension services under a registered pension plan which continue to accrue) for a certain period, it is our position that the periodic payments are employment income and can not be treated as a retiring allowance.
Where under a termination agreement, a taxpayer receives salary continuance and fringe benefits for a stated period, but in the event that he commences new employment before the expiration of that period, he loses his fringe benefits and is given a lump sum payment equal to a percentage of the balance of the payments which he would otherwise have received for the remainder of the specified period, it is our view that the lump sum payment would be a retiring allowance.
It is our view that the payments above-mentioned which are due by the employer do not lose their status where they are paid to a taxpayer after the employer is declared bankrupt.
The Department can not allow an employer to change retrospectively salary income into a retiring allowance.
The foregoing opinions are not rulings and, in accordance with the guidelines set out in Information Circular 70-6R2 dated September 28, 1990, are not binding on the Department.
We trust our comments will be of assistance to you.
Yours truly,
for Director
Financial Industries Division
Rulings Directorate
Policy and Legislation Branch
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