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:
Whether retiring allowance paid in instalments can be transferred to an rrsp by recipient.
Position TAKEN:
Yes
Reasons FOR POSITION:
Routine
XXXXXXXXXX 5-963895
Attention: XXXXXXXXXX
January 7, 1997
Dear Sirs:
Re: Transfer of a retiring allowance to an RRSP
This is in reply to your facsimile of November 22, 1996, concerning the above-noted topic.
As discussed by telephone on November 26, 1996, (XXXXXXXXXX-Duff) 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, and the special release thereto. Accordingly, we can not address the specific situation detailed in your letter at this time. We can however provide you with the following general comments which may be of assistance to you.
Whether the payments you described in your letter are payments of a "retiring allowance" within the meaning of subsection 248(1) of the Income Tax Act (the "Act") is a question of fact. However if it is determined that the amounts do constitute a retiring allowance, the fact that they are paid in instalments will not, in and of itself, disqualify any of them as being a payment of a "retiring allowance" as defined in the Act.
If a retiring allowance is received by an employee in instalments, an amount may be deducted from income in the year it is received in accordance with paragraph 60(j.1) of the Act if it:
1. is included in income for the year under subparagraph 56(1)(a)(ii) of the Act;
2. is designated by the recipient in the income tax return for the year;
3. does not exceed the amount calculated in accordance with the provisions of subparagraph 60(j.1)(ii) of the Act, and
4. does not exceed the amount paid by the recipient to the registered retirement savings plan (RRSP) in the year or within 60 days thereof, in respect of the amount designated, to the extent that it was not deducted in computing the recipient's income for a preceding taxation year.
An employee may claim a deduction under paragraph 60(j.1) whether the retiring allowance is transferred directly by an employer to the employee's RRSP or if it is first paid to the employee by the employer. Withholding tax must be withheld from the payment by the employer and the employee may claim this on filing a personal tax return for the year. On the other hand, as noted in paragraph 14 of the Department's Interpretation Bulletin, IT-337R2, and on page 20 of the Guide "1996 RRSPs and Other Registered Plans for Retirement", if the retiring allowance is paid directly to the RRSP by the employer, a waiver of withholding tax in respect of the amount qualified for transfer, as explained above, may be obtained by completing a TD2 form.
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
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