23 February 1995 External T.I. 9432995 - 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 ISSUE:

Whether a regional planning commission (previous employer) is a person related to the current employer, another regional planning commission, where both commissions are crown corporations established under the Alberta Planning Act and both participate in the local authorities pension plan.

Whether the Federal Government is a person related to the current regional planning commission.

Position TAKEN:

Yes, where previous years of service recognized under the local authorities pension plan, then employers are "related" pursuant to 60(j.1)(v).

Reasons FOR POSITION TAKEN:

60(j.1)(v).

			5-943299
XXXXXXXXXX		L. Roy

Attention: XXXXXXXXXX
February 23, 1995

Dear Sir:

Re: Retiring Allowance

This is in reply to your letter of December 20, 1994 in which you requested our opinion on whether years of service with another employer which participates in the local authorities pension plan can be considered for purposes of calculating the number of years when determining the eligible portion of a retiring allowance transferred to a registered retirement savings plan ("RRSP").

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 submitted in the manner set out in Information Circular 70-6R2, dated September 28, 1990. Where the particular transactions are completed, the enquiry should be addressed to the relevant district taxation office. However, we offer you the following general comments which may be of assistance to you.

Paragraph 60(j.1) of the Act provides a deduction for the transfer of a retiring allowance to an individual's RRSP. The deduction is permitted up to the maximum amount described in subparagraph 60(j.1)(ii) of the Act, namely $2000 times the number of years the individual was employed by the employer or a person related to the employer plus $1500 times the number of years before 1989 in respect of which employer contributions under a pension plan or deferred profit sharing plan of the employer or a person related to the employer had not vested in the individual at the time the retiring allowance was paid.

It is a question of fact whether a person is related to an employer as required by subparagraph 60(j.1)(ii) of the Act. There are, however, provisions in the Act, such as section 251 and subparagraphs 60(j.1)(iv) and (v) of the Act, which define certain relationships as satisfying the test for purposes of the paragraph 60(j.1) deduction. With specific reference to subparagraph 60(j.1)(v) of the Act, where the individual receiving the retiring allowance was previously employed by another employer, the individual's service with the previous employer may be added to the years of employment to arrive at the total for purposes of subparagraph 60(j.1)(ii) of the Act if the individual's service with the previous employer is recognized to determine the individual's pension benefits upon retirement. In other words, if the individual will be receiving a pension based on the total years of service, then all those years of service can be counted towards the maximum amount of the retiring allowance eligible for the deduction under paragraph 60(j.1) of the Act.

Although the foregoing comments are not binding on the Department, we trust they are helpful. If you have any questions do not hesitate to contact us.

Yours truly,

for Director
Financial Industries Division
Rulings Directorate
Policy & Legislation Branch