2 October 1995 External T.I. 9521665 - 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:

Whether an employee is considered to have retired where his services are retained as a consultant by his former employer; question of whether person is an employee or self-employed.

Position TAKEN:

Considered to have retired if sole involvement is director at nominal compensation; not enough facts given to provide answer.

Reasons FOR POSITION TAKEN:

Question of fact

			5-952166
XXXXXXXXXX	M. Shea-DesRosiers

Attention: XXXXXXXXXX

October 2, 1995

Dear Sirs:

Re: Retiring Allowance
Subsection 248(1) of the Income Tax Act

This is in reply to your letter of August 9, 1995 wherein you ask a technical interpretation regarding a retiring allowance to be paid in the circumstances outlined in your letter.

Written confirmation of the tax implications inherent in proposed transactions are given by this Directorate only where the transactions are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R2. One of the requirements of an advance income tax ruling request is that all the facts should be submitted. The following brief comments are, therefore, of a general nature only, and are not binding on the Department.

It is our position that an employee will be considered to have retired where his sole involvement with a former employer is to be a director at nominal compensation (see paragraph 4(a) of Interpretation Bulletin IT-337R2, a copy of which is enclosed for your information).

The determination of whether a person performing services is an employee or self-employed is primarily one of facts. Several tests have been developed overtime by the Courts to determine whether an individual is an employee or an independent contractor; however, such tests may not be appropriate in a non arm's length situation.

Since we do not have all the facts, we are unable to provide you with more general comments that would help you resolve your problem. If you decide to seek our interpretation of the Income Tax Act with respect to your proposed transactions, we would be pleased to review your situation in the context of an advance income tax ruling.

Yours truly,

for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch