16 February 1995 External T.I. 9502075 - COURT AWARD 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: Are court awards retiring allowances

Position TAKEN: yes

Reasons FOR POSITION: Standard application of law

XXXXXXXXXX 7-950207

Attention: XXXXXXXXXX

February 16, 1995

Dear Sirs:

Re: Court Award on Early Retirement

We have been asked to reply to your request for clarification of the income tax treatment of a specific award made by the Ontario Court of Justice (General Division) and endorsed by the Court of Appeal for Ontario.

Since your enquiry deals with an actual award to specific taxpayers we can not provide you with a binding written confirmation of the tax implications unless the award has not been paid and you request an advance income tax ruling in the manner set out in the enclosed Information Circular 70-6R2. On the other hand, if the award has already been paid, enquiries concerning its treatment should be made through your clients' local District Taxation Office in London.

While we can not comment on the particulars of your case, the Department's general view is that an amount other than:

a superannuation or pension benefit;

an amount received as a consequence of the death of an employee;

an amount described in subparagraph 6(1)(a)(v) of the Income Tax Act (the "Act"); or

an amount received as an award or reimbursement of legal expenses as described below,

paid on account of, in lieu of or in settlement of an order or judgement of a competent tribunal will be a retiring allowance as defined in subsection 248(1) of the Act when the payment is made as a consequence of the loss of an office or employment of an employee.

Amounts received as an award or reimbursement of legal expenses paid by a taxpayer to collect or to establish a right to a retiring allowance do not form a part of the retiring allowance. The recipient of these amounts must report them as income in accordance with paragraph 56(1)(l.1) of the Act. However, he or she may, within limits, claim an offsetting deduction for all or a portion of the award in accordance with paragraph 60(o.1) of the Act.

We trust our comments will be of assistance to you.

Yours truly,

for Director
Financial Industries Division
Rulings Directorate
Policy & Legislation Branch