27 November 1998 External T.I. 9825665 - PAYOUT OF SICK LEAVE CREDITS ON TRANSFER

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 payout of sick leave credits on transfer from one position to another with the same employer constitutes retiring allowance.

Position: No.

Reasons:

No retirement or loss of employment has occurred.

XXXXXXXXXX 			5-982566
P. -A. Sarrazin
November 27, 1998

Dear XXXXXXXXXX:

Re: Payout of Sick Leave Credits on transfer of position

This is in reply to your letter of October 2, 1998, addressed to the XXXXXXXXXX Tax Services Office. Your letter was forwarded to our office for reply. We also acknowledge facsimiles dated November 24, 1998, sent by yourself and XXXXXXXXXX.

In your letter, you mention that a settlement was reached between XXXXXXXXXX former principals, including yourself, and the XXXXXXXXXX School Board following the early termination of their employment contract.

XXXXXXXXXX

Our Comments

Written confirmation of the tax implications inherent in particular transactions are given by this Directorate only where the transactions are proposed and are the subject matter of an advance ruling request. However, we are prepared to provide the following comments which are of a general nature and are not binding on the Department.

“Retiring allowance” is defined in subsection 248(1) of the Act to mean an amount (other than a superannuation or pension benefit, an amount received as a consequence of the death of an employee or a benefit described in subparagraph 6(1)(a)(iv)) received

(a) on or after retirement of a taxpayer from an office or employment in recognition of the taxpayer’s long service, or

(b) in respect of a loss of an office or employment of a taxpayer, whether or not received as, on account or in lieu of payment of, damages or pursuant to an order or judgement of a competent tribunal,

by the taxpayer or, after the taxpayer’s death, by a dependant or a relation of the taxpayer or by the legal representative of the taxpayer.

Retirement or loss of an office or employment does not include a transfer from one office or position to another with the same employer (or an affiliate), in a different capacity (including one with diminished responsibilities). This position is expressed in paragraph 3 of IT-337R3 (copy attached). Amounts payable by the employer upon such transfer must be included in income pursuant to subsections 5(1) or 6(3) of the Income Tax Act.

Thus, notwithstanding the Department’s general position that payments of unused sick leave credits at retirement constitute a retiring allowance, a retirement did not take place coincident with the payment of the sick leave credits at issue. Therefore, these amounts cannot be considered a retiring allowance.

We trust that these comments will be of assistance.

Yours truly,

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