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:
1) Who can pay a retiring allowance? 2) Determination of whether inactive officer is employed?
Position:
1) Employer 2) Question of Fact
Reasons:
1) Preamble to 60(j.1) is very clear. 2) No details provided.
XXXXXXXXXX 973053
Attention: XXXXXXXXXX M.P. Sarazin
December 2, 1997
Dear Sirs:
Re: Retiring Allowances
This is in reply to your letter dated November 17, 1997, wherein you requested further clarification in respect of the payment of retiring allowances in your specific situation.
In our letter dated July 28, 1997 (the "Letter"), we stated that confirmation of the tax implications regarding your particular proposed transactions would only be provided in the context of a request for an advance income tax ruling. Since we have not reviewed any of the facts and proposed transactions, we can only provide the following general comments.
As we stated in point 1 of the Letter, the Income Tax Act (the "Act") does not prevent an employer from paying a retiring allowance based on years of service with a former employer. However, we note that paragraph 60(j.1) of the Act makes reference to "an amount paid to the taxpayer by an employer". Consequently, the recipient of the payment must be or have been an employee of the payer of the retiring allowance before the retiring allowance will qualify for the transfer under paragraph 60(j.1).
The determination of whether an inactive officer of a corporation is, in fact, employed by a corporation and eligible to receive a retiring allowance is a question of fact that could only be determined after a review of all of the facts.
We trust these comments will be of assistance.
Yours truly,
for Director
Financial Industries Division
Income tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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