30 November 1995 Ruling 9622013 - RETIRING ALLLOWANCE, PROFESSIONAL CORPORATION

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:

Retiring allowance paid by professional corporation

Position:

Previously provided similar ruling

Reasons:

TP is an employee of the professional corporation

XXXXXXXXXX						3-962201
XXXXXXXXXX
XXXXXXXXXX

Attention: XXXXXXXXXX

XXXXXXXXXX, 1996

Dear Sirs:

Re: Advance Income Tax Ruling
Retiring Allowance
XXXXXXXXXX

This is in reply to your letters of XXXXXXXXXX wherein you requested the above-noted advance income tax ruling.

Facts

XXXXXXXXXX

XXXXXXXXXX

XXXXXXXXXX has been an employee of the employer since it became a partner.

XXXXXXXXXX retired as a full time employee several years ago. However, the Employer has continued to receive a continuing income interest from the Partnership and XXXXXXXXXX has continued to work for the Employer XXXXXXXXXX

The Employer has never had a pension plan or deferred profit sharing plan.

XXXXXXXXXX

Dividends, Salary, Wages and Benefits paid by the Employer to XXXXXXXXXX have been as follows:

XXXXXXXXXX

XXXXXXXXXX wish to retire and no longer receive any remuneration from the Employer other than nominal director's fees.

After retiring the only activities they will perform will be
XXXXXXXXXX

XXXXXXXXXX will resign as an officer of the Employer.

Proposed Transaction

The Employer proposes to pay a retiring allowance of $XXXXXXXXXX

Purpose of Proposed Transaction

The purpose of the payment is to recognize XXXXXXXXXX service with the Employer.

Additional Information

To the best of your knowledge and that of XXXXXXXXXX and the Employer, none of the issues involved in this ruling are being considered by a District Tax Services Office or Taxation Centre in connection with a return already filed and none of the issues are under objection.

Rulings

Provided the above statements of facts and proposed transactions are accurate and constitute a complete disclosure of the relevant facts, and proposed transactions and that the proposed transactions are carried out as proposed, we rule that

A.The $XXXXXXXXXX referred to in 11 above will qualify as a retiring allowance as defined in subsection 248(1) of the Income Tax Act (the "Act").

B.The amount of the retiring allowance will be deductible in determining the income of the Employer in the year accrued subject to the provisions of subsection 78(4) of the Act;

C.The amount of the retiring allowance will be included in XXXXXXXXXX income in the year of receipt in accordance with the provisions of subparagraph 56(1)(a)(ii) of the Act; and

D.XXXXXXXXXX will be entitled to a deduction under paragraph 60(j.1) of the Act to the extent permitted by that paragraph on the contribution of the retiring allowance to his registered retirement savings plan.

These rulings are given subject to the limitations and qualifications set out in Information Circular 70-6R2 dated September 28, 1990 and the special release thereto dated September 30, 1992, issued by Revenue Canada, Taxation and are binding provided the Retiring Allowance is received by XXXXXXXXXX by way of transfer to his RRSP, before XXXXXXXXXX

Yours truly,

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