10 September 1996 External T.I. 9628155 - RETIRING ALLOWANCE RETURN TO WORK

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: Rollover of retiring allowance to RRSP

Position: 			General position with respect to return to work

Reasons:			Established positions

XXXXXXXXXX							5-962815

September 10, 1996

Dear Sir:

Re: Retiring Allowance

This is in reply to your letter of July 19, 1996, concerning the payment of retiring allowances to persons who may continue to work on a part time basis or under contract.

Since the subject of your enquiry appears to relate to a factual proposal, we are unable to provide you with any specific comments at this time. Confirmations of the tax implications in particular situations may only be provided by this Directorate where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in the Department's Information Circular 70-6R2 available from your local Tax Services Office. However, while we are unable to address your specific situation, at this time, we can provide you with the following general comments on this topic.

Generally, where an individual is rehired (on a casual, part-time or contract basis) by a former employer or an affiliated employer, shortly after leaving an office or employment, the individual will be considered not to have retired or suffered a loss of employment or office. However, where, an employee has retired without any assurance at the time of retirement of being rehired by the former employer, and receives from the former employer a payment based on long service, it is the Department's position that the payment will qualify as a retiring allowance even if the parties have an understanding that the individual might be rehired at a later time. Such a payment will not be considered a retiring allowance, however, where, between the date of the notice of retirement or of termination and the last day of employment, arrangements are made for the employee to be rehired.

Similarly, where the individual is engaged shortly after leaving his employment to perform services for his former employer or an affiliate as an independent contractor, a determination as to whether there has been a loss of employment or office or a retirement will depend on the nature of the contractual arrangement. Our comments in the previous paragraph apply equally in these circumstances.

These comments reflect an expression of opinion only and are not binding on the Department, as explained in paragraph 21 of Information Circular 70-6R.

Yours truly,

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

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