27 March 1998 External T.I. 9731115 - 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:

Whether amounts qualify as retiring allowance

Position:
	To the extent they are paid for the loss of an 	employment

Reasons:

Position in IT-337R2

5-973111
XXXXXXXXXX G. Martineau

March 27 1998

Dear Sir/Madam:

Re: Payments under loss of employment

This is in reply to your letter of November 24, 1997 in which you requested our views concerning the tax treatment of certain payments made under exit options to departing employees.

It appears that your enquiry relates to specific transactions, either proposed or completed. Where a transaction is proposed, confirmation of the tax implications arising therefrom should be sought by way of an advance ruling request submitted in the manner set out in Information Circular 70-6R3. Where a completed transaction is involved, the enquiry should be addressed to the relevant Tax Services Office. We offer, however, the following general comments.

Paragraph 19 of Interpretation Bulletin IT-470R mentions that tuition fees paid by an employer are not considered to be a taxable benefit for an employee where the course for which the fees were paid was undertaken on the employer's initiative and for the benefit of the employer rather than the employee. This position would apply where the present employer is reimbursed for the tuition fees by a previous employer of the employee.

An amount received from an employer after retirement is taxable either as employment income by virtue of subsection 6(3) of the Act or as a retiring allowance by virtue of subparagraph 56(1)(a)(ii) of the Act. If the amount is in satisfaction of an obligation by the employer to the employee arising as a result of his employment, the amount is usually considered to be employment income unless it can be justified as a retiring allowance. If the obligation is in respect of long service or loss of office or employment, the amount likely would represent a retiring allowance as the term is defined in subsection 248(1) of the Act.

The reimbursement expenses listed on page 23 of the 1996-97 Employer's Guide to Payroll Deductions: Taxable Benefits are not taxable in respect of relocations which bring an employee to the employer's work site or out of a remote place at the termination of employment and of transfers between the job sites of the employer.

In our opinion, amounts paid as reimbursement of moving expenses and for the cost of a professional relocation consultant to help a former employee in relocating to an other locale (other that those incurred to move out of a remote location) where the former employee has obtained an employment with a new employer would be considered as a retiring allowance to the extent that the benefit can be shown to be an amount received in respect of the loss of office or employment.

The reimbursement of a former employee's incidental expenses related to volunteer work may be taxable as retiring allowance if the reimbursement is in respect of the loss of office or employment.

The above comments reflect an expression of opinion only and are not binding on the Department, as explained in paragraph 21 of Information Circular 70-6R3. We trust, however, that they are of assistance.

Yours truly,

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

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