30 November 1996 Ruling 9722553 - REASONABLE RETIRING ALLOWANCE

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:

Would an amount be considered reasonable retiring allowance

Position:

Yes, the amount not exceeding an amount eligible for rollover under paragraph 60(j.1) of the Act to an RRSP would generally be accepted as reasonable.

Reasons:

In accordance with guideline provided in Question 10 at the 1992 Prairie Tax Conference Round Table and prior rulings given.

XXXXXXXXXX							972255
									XXXXXXXXXX
Attention:  XXXXXXXXXX

XXXXXXXXXX, 1997

Dear Sirs:

Re: Advance Income Tax Ruling
XXXXXXXXXX

This is in reply to your letters of XXXXXXXXXX, in which you requested an advance income tax ruling on behalf of the above noted taxpayers. Further to our telephone conversation of XXXXXXXXXX and your letter of XXXXXXXXXX, you provided additional information with respect to the facts and proposed transactions provided in your previous letter.

FACTS

1. XXXXXXXXXX.

2. Since XXXXXXXXXX his wife, XXXXXXXXXX, has been employed by XXXXXXXXXX in the farm business. Her duties have been all encompassing in mixed farming. She also shared the work with the livestock.

3. XXXXXXXXXX compensation from XXXXXXXXXX has been as follows:

XXXXXXXXXX.

4. XXXXXXXXXX also worked for her son XXXXXXXXXX and received compensation of $XXXXXXXXXX per year.

5. XXXXXXXXXX did not pay wages for earlier years service due to the application of former subsection 74(3) of the Income Tax Act (the "Act").

6. XXXXXXXXXX did not take maternity leave with the birth of their XXXXXXXXXX children.

7. XXXXXXXXXX plans to retire from farming during the next two years.

8. XXXXXXXXXX plans on retiring on or before XXXXXXXXXX.

9. XXXXXXXXXX will dispose of the grain inventory from his final year of farming and rent the land and machinery to his son XXXXXXXXXX.

10. XXXXXXXXXX has not utilized any Registered Pension Plan or Deferred Profit Sharing Plan.

PROPOSED TRANSACTIONS

11. XXXXXXXXXX proposes paying a retiring allowance of $XXXXXXXXXX for her XXXXXXXXXX years of service. This proposed allowance would be payable at $XXXXXXXXXX per year for XXXXXXXXXX.

12. XXXXXXXXXX plans on rolling $XXXXXXXXXX per year of this allowance into a Registered Retirement Savings Plan as permitted under section 60(j.1) of the Act.

ADDITIONAL INFORMATION

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

RULINGS

Provided the above statement of facts and proposed transactions are accurate and constitute a complete disclosure of all relevant facts and provided the transactions are completed as proposed, we rule as follows:

A. For the purposes of section 67 of the Act, the retiring allowance proposed will be reasonable.

These rulings are given subject to the general limitations and qualifications set forth in Information Circular 70-6R3 dated December 30, 1996, issued by Revenue Canada Taxation, and are binding provided the proposed transactions are initiated on or before XXXXXXXXXX.

Yours truly,

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