16 July 1996 External T.I. 9622385 - RETIRING ALLOWANCE TRANSFERS

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: Transfer of retiring allowance

Position:		Routine reply

Reasons:		Routine information provided

XXXXXXXXXX							5-962238

July 16, 1996

Dear XXXXXXXXXX:

Re: Transfer or Retiring Allowances to an RRSP

This is in reply to your letter of June 17, 1996, concerning the payment of retiring allowances to an RRSP.

In your letter you stated that you would like to contribute an amount to your RRSP for your retirement. However, you did not indicate that you have retired or that you have received or will be receiving a retiring allowance from your employer. Accordingly, you will not be able to transfer any amount to an RRSP under this provision until you do.

The provisions you have referred to are found in paragraph 60(j.1) of the Income Tax Act. They allow an individual to deduct an amount received as a retiring allowance if it is transferred to an RRSP. However, the provision restricts the amount that may be deducted to the lesser of

the amount of the retiring allowance received in the year;

the amount actually transferred to the RRSP; and

an amount equal to the total of:

(A) $2,000 times the number of calendar years before 1996 during which the individual was employed by the employer paying the allowance; and

(B) $1,500 times the years before 1989 during which the individual was employed by the employer minus the equivalent number of years for which employer contributions to a pension or deferred profit sharing plan have vested in the individual.

The amount transferred may also have to be reduced to account for amounts previously transferred to an RRSP under the provision and for amounts received from other employers. It also allows transfers for certain prior years employment with related employers. The Department's enclosed Interpretation Bulletin IT 337R2 discusses the transfer of retiring allowances to RRSPs in detail.

You should also note that a proposal has been made to change the date by which an RRSP must be matured and after which no further contributions or transfers can be made. It is proposed that for persons who are 69 years of age in 1996, an RRSP must mature by December 31, 1997 or, if the RRSP is an annuity purchased before March 6, 1996 and has a fixed commencement date, by December 31, 1998.

We trust this information will be of assistance to you.

Yours truly,

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