19 June 1996 External T.I. 9618245 - SALE OF ASSETS 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.

		961824
XXXXXXXXXX	M.P. Sarazin

Attention: XXXXXXXXXX

June 19, 1996

Dear Sirs:

Re: Sale of Assets and Payment of a Retiring Allowance

This is in reply to your letter dated May 22, 1996, wherein you requested confirmation that the Department has reconsidered its earlier position with respect to the payment of retiring allowances when a business or part of a business is sold and, as a result, a former employer can now pay a retiring allowance to its former employees where a business or part of the business has been sold to an arm's length person and the employees are retained by the new owner of the business.

Comments

We confirm that where there is a loss of employment with the vendor and the payment is in respect of the loss of employment with the vendor then the payment would qualify as a retiring allowance for purposes of the Income Tax Act, notwithstanding the establishment of a new employment with an arm's length purchaser. However, this position does not extend to a situation where there is an arm's length sale of shares of a corporation because the employees are considered to be employed by the same employer, the corporation.

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

Yours truly,

for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate