1 February 1996 External T.I. 9600865 - LOSSS OF OFFICE, UNION POSITION, RA

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:

Where an individual holds an elected position with his union, he continues to be paid by his employer and the union reimburses the employer for part of the salary and all of the employer's pension contributions; can the employer pay the individual a retiring allowance?

Position:

Only if there is a loss of office or employment

Reasons:

Generally, individual would still be considered to be employed by the employer so there is no loss of office or employment.

	                             				960086
XXXXXXXXXX		                            		M.P. Sarazin

Attention: XXXXXXXXXX

February 1, 1996

Dear Sirs:

Re: Retiring Allowance

This is in reply to your letter dated December 28, 1995, and addressed to the Winnipeg Tax Services Office, wherein you requested a ruling regarding the severance of an employee/employer relationship for the purpose of paying a retiring allowance.

Comments

It appears that the interpretation you seek relates to proposed transactions to be undertaken by specific taxpayers and, therefore, we bring to your attention Information Circular 70-6R2 dated September 28, 1990, and the Special Release thereto issued on September 30, 1992, issued by Revenue Canada, Customs, Excise and Taxation. Confirmation of tax consequences with respect to proposed transactions involving specific taxpayers will only be provided in response to a request for an advance income tax ruling submitted in accordance with the Information Circular. Nevertheless, we can provide you with the following general comments.

A retiring allowance is an amount received by an individual upon or after retirement from an office or employment in recognition of one's long service, or in respect of a loss of office or employment. It is a question of fact whether an individual has retired or has suffered the loss of an office or employment.

Where an individual is elected, through his employment with an employer, to hold a certain position in his union and, as part of the union agreement, the individual continues to be paid or partially paid by the employer and continues to participate in the employer's pension plan and medical/health/dental plan, we are of the view that the individual could be considered to be on a leave of absence in such situations while still being employed by the employer. However, if the individual's employment is in fact terminated while on such leave we would agree that a retiring allowance can be paid. Evidence supporting termination of employment would generally include the cessation of the individual's participation in the employer's pension plan.

We trust the above comments will be of assistance to you.

Yours truly,

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

C.C.Dian Versluis
Winnipeg Tax Services Office

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