23 October 1996 External T.I. 9633445 - RETIRING ALLOWANCE, DIVORCE

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:

Is a specific payment a retiring allowance

Position:

Question of fact

Reasons:

Routine

XXXXXXXXXX							5-963344

October 23, 1996

Dear Madam:

Re: Retiring Allowances

This is in reply to your facsimile of October 4, 1996, in which you requested our opinion concerning the treatment of an amount to be paid from your husband and former employer as a retiring allowance. You also advised that you and your husband are trying to reach a settlement and get a divorce.

Written confirmation of the tax implications inherent in particular transactions are given by this Directorate only where the transactions are proposed and are the subject matter of an advance ruling request submitted in the manner set out in Information Circular 70-6R2, dated September 28, 1990 (enclosed). However, we can provide you with the following general comments which may be of assistance to you.

Retiring allowances are described in detail in the enclosed Interpretation Bulletin IT-337R2. In general terms, a retiring allowance is an amount (other than a superannuation or pension benefit, and, after November 12, 1981, an amount received as a consequence of the death of an employee) received upon or after retirement from an office or employment in recognition of one's service or in respect of a loss of office or employment. A retiring allowance does not include any amount paid in respect of a division of property on a marriage breakdown.

There is no limitation on when a retiring allowance must be paid. However the allowance must be reasonable in the circumstances and we would generally expect the amount of the allowance to be related to such things as the employee's years of service, the employee's level of remuneration and the amount of other benefits to be provided as a result of the employment or termination.

The amount of retiring allowance that can be transferred to an RRSP under which the recipient is the annuitant is also discussed in detail in Interpretation Bulletin IT-337R2 subject to some recent amendments. In general, you can transfer a retiring allowance to your RRSP or RPP in the year you receive it, or within 60 days after the end of that year to the extent it does not exceed the sum of:

i) $2,000 times the number of calendar years before 1996 during which you were employed by the employer paying the retiring allowance, or by an employer related to your employer; and

ii)$1,500 times the number of years described in i) that are before 1989 for which employer contributions to a pension plan or deferred profit sharing plan of your employer or an employer related to your employer did not vest in you at the time the retiring allowance was paid.

We trust our comments will be of assistance to you.

Yours truly,

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