1999 Ruling 9910453 - REASONABLE RETIRING ALLOWANCE TO A SPOUSE

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 an amount be considered reasonable retiring allowance?

Position:

Yes, the amount not exceeding an amount eligible for rollover under paragraph 60(j.1) of the Act to an RRSP would generally be accepted as reasonable,

Reasons:

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

xxxxxxxxxx
xxxxxxxxxx 3-991045
xxxxxxxxxx

Attention: xxxxxxxxxx

xxxxxxxxxx, 1999

Dear Sirs:

Re: Advance Income Tax Ruling

xXXXXXxxxx ("Mrs. A")- xxxxxxxxxx

XXXXXXXXXX ("Mr. A")- xxxxxxxxxx

This is in reply to your letter of XxXXXXXXXX, wherein you requested an advance income tax ruling on behalf of the above noted taxpayers. Further to our telephone conversation (xxxxxxxxxx) and your facsimile submission of xxxxxxxxxx you provided additional information with respect to the facts and proposed transactions provided in your previous letter.

FACTS

1. Mrs. A and Mr. A's address is: xxxxxxxXxx.

2. Mrs. A and Mr. A deal with the XXXXXXXXxx Tax Services Office and file their tax returns with the xXXXXXXxxx Tax Centre.

3. Mr. A commenced farming on the family farmstead near xxxxxxxxxx.

4. In XXXXXXXXXX Mr. A married Mrs. A, his present wife, who immediately commenced providing farm services with him.

5. Mrs. A's compensation from Mr. A since xxxxxxxxxx has been as follows

xxxxxxxxxx
xxxxxxxxxx
xxxxxxxxxx
xxxxxxxxxx
xxxxxxxxxx
xxxxxxxxxx
xxxxxxxxxx

6. Mr. A did not pay wages to Mrs. A before xxxXXXXxxx due to the application of former subsection 74(3) of the Income Tax Act (the "Act")

7. Mrs. A did not take maternity leave with the birth of their three sons. She has been unable to work for a maximum period of three months due to illness.

8. Mr. A will attempt to sell all of his farm machinery in xxxxxxxxxx. If unsuccessful an auction sale will be scheduled in XXXXxxXXXX.

9. Mr. A will dispose of the grain inventory during the XXXXXXXXxx calendar year.

10. For health reasons, Mrs. A intends to retire from the farm in xxxxxxxxxx.

11. Mrs. A has not utilized any Registered Pension Plan or Deferred Profit Sharing Plan.

PROPOSED TRANSACTIONS

12. Mr. A proposes to pay a retiring allowance of $XXXXXXXXXX to Mrs. A in XXXXXXXXXX for her xxxxxxxxxx years of service.

13. Mrs. A plans on rolling $XXXXXXXXXX of this allowance into a Registered Retirement Savings Plan as permitted under paragraph 6O(j.1) of the Act.

ADDITIONAL INFORMATION

14. To the best of your knowledge and that of Mrs. A and Mr. A none of the issues in respect of which rulings are herein requested is:

(a) in an earlier return of Mrs. A, Mrs. A or a related person,

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

(c) under objection by Mrs. A, Mr. A 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.

15. To the best of your knowledge, Mrs. A or Mr. A's knowledge, this request for an advance income tax ruling contains all the relevant facts and provides a full and fair presentation of the proposed arrangement in respect of the rulings sought.

RULING

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. For the purposes of section 67 of the Act, the proposed payment of retiring allowance as described in paragraph 12 above will be reasonable.

This ruling is 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 completed and effective 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