1998 Ruling 9821903 - RETIRING ALLOWANCE - RETIREMENT DATE

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:	A)	Would an amount be considered a retiring allowance;
B) Would the employee be entitled to a deduction under paragraph 60(j.1) of the Act;

Position: Yes.

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

XXXXXXXXXX
XXXXXXXXXX 3-982190
XXXXXXXXXX

Attention: XXXXXXXXXX

XXXXXXXXXX, 1998

Dear Sirs:

Re: Request for Advance Tax Ruling
XXXXXXXXXX

This is in reply to your letter of XXXXXXXXXX, wherein you requested an advance income tax ruling on behalf of the above noted taxpayer. Further to our various telephone conversations (XXXXXXXXXX), the XXXXXXXXXX letter of XXXXXXXXXX and your letter of XXXXXXXXXX, you provided additional information with respect to the facts and proposed transactions of this ruling request.

DEFINITIONS AND ABBREVIATIONS

In this letter, the following terms have the meanings specified:

"Act" means the Income Tax Act, R.S.C. 1985 (5th Supp.) c.1, as amended to the date hereof, and unless otherwise stated, every reference herein to a Part, section, subsection, paragraph or subparagraph is a reference to the relevant provision of the Act;

"Board" means Opco's Board of Directors;

"Mr. A" means XXXXXXXXXX;

"Opco" means XXXXXXXXXX;

"Plan" means Pension plan for salaried and senior management employees of XXXXXXXXXX and affiliated companies;

"Retiring Allowance" has the meaning assigned by subsection 248(1);

"RRSP" (or registered retiring savings plan) has the meaning assigned by subsection 146(1).

RELEVANT FACTS

1. The address of Mr. A is: XXXXXXXXXX.

2. Mr. A deals with the XXXXXXXXXX Tax Services Office and files his returns with the XXXXXXXXXX Tax Centre.

3. Mr. A is the Chairman of the Board.

4. Mr. A was employed by Opco since XXXXXXXXXX and has been employed continuously by it since that date.

5. Mr. A's compensation from Opco since XXXXXXXXXX has been as follows:

XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX

6. Mr. A started participating in the Plan as of XXXXXXXXXX. He will not receive any pension benefit for the period of employment from XXXXXXXXXX to XXXXXXXXXX.

PROPOSED TRANSACTIONS

7. Mr. A will begin receiving his retirement pension from the Plan in XXXXXXXXXX. He will cease to be an employee of Opco as of XXXXXXXXXX, other than for the duties described in paragraph 9 below.

8. No benefit will accrue to Mr. A under the Plan after XXXXXXXXXX.

9. Mr. A will continue in his role as Chairman of the Board until the annual general meeting of the Board on XXXXXXXXXX, (which is when the Board members and officers are normally elected or replaced). At that time, Mr. A will resign as Chairman of the Board and relinquish any membership on the Board. The reason for this continuation is to allow for orderly replacement of the Chairman of the Board in the normal fashion.

10. Following his resignation on XXXXXXXXXX, Mr. A will be retired from Opco. He will not be re-employed by, or receive any remuneration from, Opco or any person related to Opco.

11. In recognition of Mr. A's long service, Opco proposes to pay a lump sum amount of $XXXXXXXXXX to Mr. A on or after XXXXXXXXXX. The determination of the amount of $XXXXXXXXXX is based on Mr. A's number of years of service with Opco.

12. After XXXXXXXXXX, Mr. A will continue to meet with business contacts that he has made over the years, when he is travelling outside of XXXXXXXXXX in respect of work for XXXXXXXXXX for reasons of providing assistance as a volunteer to such organizations. This will be the only activity that Mr. A intends to engage in that may have a benefit to Opco and Mr. A will not receive any remuneration for such activity.

OTHER INFORMATION

13. To the best of your knowledge and that of Opco none of the issues in respect of which rulings are herein requested is:

(a) in an earlier return of Opco or a related person,

(b) being considered by a tax services office or tax centre in connection with a previously filed tax return of Opco,

(c) under objection by Opco or a related person,

(d) before the courts or, if a judgment has been issued, the time limit for appeal to a higher court has not expired, and

(e) the subject of a ruling previously issued by the Income Tax Rulings and Interpretations Directorate.

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. The payment of an amount of $XXXXXXXXXX as described in paragraph 11 above on or after XXXXXXXXXX will qualify as a Retiring Allowance and will be included in Mr. A's income in his XXXXXXXXXX return pursuant to subparagraph 56(1)(a)(ii).

B. Mr. A will be entitled to a deduction under paragraph 60(j.1) to the extent permitted under that paragraph, upon the subsequent contribution of an amount referred to in Ruling A to a RRSP of which he is the annuitant.

These rulings are given subject to the general limitations and qualifications set forth in Information Circular 70-6R3 of December 30, 1996, issued by Revenue Canada Taxation, and are binding provided the proposed transactions are initiated within six months of the date of this letter.

Yours truly,

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

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