18 January 1995 External T.I. 9500295 - 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:

Calculation of eligible amount of retiring allowance transferable to an RRSP.

Position TAKEN:

Described limits set by 60(j.1).

Reasons FOR POSITION TAKEN:

General information.

									5-950029
XXXXXXXXXX							L. Roy

January 18, 1995

Dear Sir:

Re: Retiring allowance

This is in reply to your letter of December 8, 1994 in which you requested our opinion concerning the transfer of an amount received pursuant to a wrongful dismissal action 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.

An amount received by an employee to compensate him for wrongful dismissal can be transferred to a RRSP and a deduction can be taken to the extent provided by paragraph 60(j.1) of the Act, as long as the amount received is a "retiring allowance" as defined in subsection 248(1) of the Income Tax Act (the "Act").

The amount of a retiring allowance that a taxpayer can transfer to a RRSP under the Act is limited to $2,000 for each calendar year or part-year in which he was employed by the employer or a person related to the employer from whom he received the retiring allowance and an additional $1,500 for each calendar year or part-year that is before 1989 in which no part of his employer's contributions to a registered pension plan or a deferred profit-sharing plan has vested in his name at the time the retiring allowance is paid.

The number of years of employment include years with the employer paying the retiring allowance and years of employment with a "person related to the employer". Subparagraphs 60(j.1)(iv) and (v) of the Act define this phrase to include a previous employer whose business was acquired or continued by the current employer, and a previous employer where employment with the previous employer is recognized for purposes of determining the individual's pension benefits under the current employer's pension plan.

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