3 July 1996 Internal T.I. 9617276 - PRE-RETIREMENT LEAVE OF ABSENCE

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:

Can a period of leave before retirement qualify as an "eligible period of temporary absence" for purposes of 8500(1)?

Position:

Question of Fact

Reasons:

The period in question appeared to be after the cessation of employment and if this is the case then it can't be an eligble period of temporary absence.

						July 3, 1996

	HEADQUARTERS			HEADQUARTERS
	Stella M. Black			M.P. Sarazin
	Director				957-3499
	Registered Plans Division	

Attention: John O'Meara
961727

Employment during Leave Period

As per our conversation (O'Meara/Duff) of May 9, 1996, we are providing you with our comments with respect to whether a continued employment relationship exists during an unpaid period of leave immediately preceding an employee's scheduled retirement. XXXXXXXXXX requested a ruling with respect to XXXXXXXXXX qualifying as an "eligible period of temporary absence", within the meaning assigned by subsection 8500(1) of the Income Tax Regulations (the "Regulations"). XXXXXXXXXX Since your division is responsible for the particular provision, XXXXXXXXXX was advised that you would respond to their request.

Comments

Under the provisions of paragraph 8503(3)(a) of the Regulations, pension benefits may be provided in respect of one or more of the following periods:

(i) a period throughout which the member is employed in Canada by, and receives remuneration from, an employer who participates in the plan,

...

(iii) an eligible period of temporary absence of the member with respect to an employer who participates in the plan....

An "eligible period of temporary absence" is defined in subsection 8500(1) of the Regulations to mean a period throughout which the individual does not render services to the employer by reason of leave of absence, layoff, strike, lock-out or any other circumstance acceptable to the Minister. In our memorandum to your office (#931889) dated July 23, 1993, we commented that there is a requirement of continued employment for any period to qualify as a "eligible period of temporary absence". In this situation, there are no services performed, no salary or benefits, and no intention to return to work. We would not consider this to be continued employment. The fact that there will be a subsequent payment of amounts that will be considered employment income would not, by itself, cause the employment relationship to continue.

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

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