15 May 1996 External T.I. 9615025 - PERSON RELATED FOR RETIRING ALLOWANCE DEDUCTION

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 current employer "related" to former employer for purposes of 60(j.1).

Position:

General review of law.

Reasons:

Routine.

									961502
XXXXXXXXXX							P. Spice

Attention: XXXXXXXXXX

May 15, 1996

Re: "Person Related to the Employer" for Purposes of Paragraph 60(j.1)

This is in reply to your letter of April 17, 1996 to the Calgary Tax Services Office, which was forwarded to us for reply. You ask whether an employer is related to another person for purposes of the calculation of the amount eligible for deduction in accordance with clause 60(j.1)(ii)(A) of the Income Tax Act (the "Act").

Your query relates to a specific taxpayer and a course of events which are substantially completed. We are unable to provide a binding determination except in the context of an advance income tax ruling and then only with respect to proposed transactions. We can offer, however, the following general comments.

A person is related to the employer if it satisfies the criteria in section 251 or subparagraph 60(j.1)(iv) or (v) of the Act. We confirm that, in order to be found "related" with another, a person need satisfy only one of these provisions and not, for example, both subparagraphs 60(j.1)(iv) and (v) of the Act.

Thus, if the current employer acquired the business of a former employer, the two employers will be related for purposes of paragraph 60(j.1) of the Act. Likewise, if the current employer controls the former employer, the two are related for purposes of paragraph 60(j.1) of the Act.

With respect to subparagraph 60(j.1)(v) of the Act, please note that "service is recognized" under the current employer's pension plan only where the benefits to be paid relate to those years of service. This could occur where, for example, the employee's accrued benefits have been transferred from the former employer's pension plan or where the employee has purchased past service under the current employer's pension plan. The waiving or reduction of a waiting or vesting period under the current employer's pension plan for employees who were formerly employed by another is not a recognition of the former service as required by subparagraph 60(j.1)(v) of the Act.

We trust our 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.Ms Janice Shum

Calgary TSO, Section 4714