20 July 1998 External T.I. 9801745 - TEACHER, FOREIGN ASSIGNMENT, ELIGIBLE YEARS

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 years of teaching service with a foreign employer be included in the number of years of eligible service for purposes of a 60(j.1) transfer?

Position:

Only if the foreign employer qualifies as a person related to the current employer.

Reasons:

Under 60(j.1), years of service with an employer and a person related to the employer are considered in computing the transfer limits.

XXXXXXXXXX 980174
P. -A. Sarrazin
July 20, 1998

Dear XXXXXXXXXX:

Re: Transfer of Eligible Retiring Allowance

This is in reply to your letter dated January 23, 1998, wherein you requested our views regarding the determination of the number of years of service that may be used in computing the amount of retiring allowance that is eligible to be transferred to a registered retirement savings plan (“RRSP”) under paragraph 60(j.1) of the Income Tax Act (the “Act”).

XXXXXXXXXX

Tax Services Offices are responsible for providing written confirmation with respect to the tax implications relating to completed transactions. Consequently, your enquiry should be addressed to the relevant Tax Services Office. However, we are prepared to provide the following comments which are of a general nature and are not binding on the Department.

Paragraph 60(j.1) of the Act permits a taxpayer who has received a retiring allowance to defer payment of some or all of the income tax on the amount received by making a payment to a registered pension plan (“RPP”) or a registered retirement savings plan (“RRSP”) under which the taxpayer is the annuitant. The enclosed Interpretation Bulletin IT-337R3 describes what is meant by a retiring allowance, the taxation thereof and the circumstances under which a retiring allowance or a portion thereof may be transferred to an RPP or an RRSP under paragraph 60(j.1) of the Act.

The application of paragraph 60(j.1), including the computation of the amount of the retiring allowance that is eligible to be transferred to an RPP or RRSP, is explained in paragraph 12 of IT-337R3. In determining such limit, you must determine the number of years before 1996 that a taxpayer was employed by the employer or a person related to the employer.

As explained in subparagraph 13(b) of IT-337R3, a person related to the employer includes not only those persons related under section 251 of the Act but also includes any person whose business was acquired or continued by the employer and any previous employer of the retiree whose service therewith is recognized in determining the retiree’s pension benefits. Consequently, where, under the terms of an RPP, an employee has bought back all or part of the years of past service with an unrelated former employer, the former employer will be an employer related to the employer for purposes of paragraph 60(j.1) of the Act and the years of service with the former employer will be included in determining the limits under paragraph 60(j.1) of the Act.

We trust that these comments will be of assistance.

Yours truly,

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

Enclosure