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:
Was amount paid a retiring allowance?
Position TAKEN:
Referred to Tax Services for review of facts?
REASON FOR POSITION:
Factual completed transaction
XXXXXXXXXX 5-952351
September 22, 1995
Dear XXXXXXXXXX:
This is in reply to your letter of July 6, 1995, which was forwarded to this Directorate for reply by Mr David Dodge, Deputy Minister of the Department of Finance.
XXXXXXXXXX
XXXXXXXXXX
However, you have recently learned that the payment may not have qualified for transfer to an RRSP and wish to determine the actual status of the payment.
Revenue Canada's position on what payments are retiring allowances is explained in the enclosed Interpretation Bulletin IT-337R2. The definition of a retiring allowance is provided in paragraph 2 of the bulletin. Paragraph 3 then provides that to be a retiring allowance, a payment must be received upon or after retirement or be paid in respect of a loss of employment. However, paragraph 4 also notes that retirement or a loss of employment does not include transfers from one office or position to another with the same employer.
Two situations can arise where a payment will be a retiring allowance even though a recipient provides services to a former employer after the payment is received.
First, if a person retires but is subsequently re-employed by the same or a related employer the amount paid as a result of the retirement may be treated as a retiring allowance if at the time the amount was received the employee had no assurance of any kind that he or she would be rehired.
Second, if a person retires but subsequently enters into a contract for services with the former employer the amount paid may be a retiring allowance provided the former employee is acting as an independent contractor.
Several tests have been developed over time to determine whether a person is an employee or an independent contractor in such cases. These are:
(a) the Control test - whether there is a master/servant relationship;
(b) the Entrepreneur test - including the ownership of tools used, chance of profit, and risk of loss; and
(c) the Integration test - whether the service is performed as an integral part of the former employer's operations or whether it is only accessory to them.
I can not advise you whether either of these exceptions will apply to your situation from the information contained in your letter. However, I have referred your case to Ms Louise McShane of the St John Tax Services Office who will contact you shortly in order to assist you in resolving your concerns. You may also contact Ms McShane by phone at 1-506-636-3936.
I trust this action will prove satisfactory to you.
Yours truly,
for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
c.c.: Louise McShane
Problems Resolution Officer
Saint John Tax Services Office
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