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: Reporting of legal fees paid by employer N/A
Position: Part of retiring allowance.
Reasons: Employer only agreed to pay retiring allowance; this is just a direction to pay part of it to lawyer.
XXXXXXXXXX D. Duff
990785
April 1, 1999
Dear XXXXXXXXXX:
Re: Reporting of Amounts Paid on Termination
This is in reply to your letter of March 23, 1999 and further to your telephone conversation (XXXXXXXXXX/Duff) of March 31, 1999 regarding the reporting of amounts to be paid to a former employee.
The former employee disputed the amount of termination he was entitled to and took legal action against the employer. They settled on a retiring allowance of $XXXXXXXXXX and this is the total amount to be paid. The employer has a direction to pay $XXXXXXXXXX to the employee’s lawyer for payment of legal expenses and you questioned how that amount is to be reported.
In our view, the entire amount should be reported as a retiring allowance and the $XXXXXXXXXX should not be reported separately. However, the employee would likely be eligible for a deduction for this amount pursuant to paragraph 60(o.1) of the Income Tax Act which permits a deduction for the amount of legal fees paid to collect or establish a right to a retiring allowance.
This opinion is provided in accordance with the comments in paragraph 22 of Information Circular 70-6R3. It is not an advance income tax ruling and, accordingly, it is not binding on the Department.
We trust our comments will be of assistance to you.
Yours truly,
Roberta Albert, CA
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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