28 December 1989 Internal T.I. AC58989 F - Retiring Allowance

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.

Re:      Paragraph 60(j.1) and subsection 248(1) of the Income Tax Act (the "Act")

This is in reply to your letter of October 26, 1989 concerning the above-mentioned subject.

You describe the following situation:

An individual retires from employment with an arm's length employer.  Pursuant to the retirement package offered by the employer, the individual becomes entitled to a retiring allowance as defined in subsection 248(1) of the Act of a specific amount.  The individual had been employed with the employer for sufficient years that the full amount of the unpaid retiring allowance would have been deductible under paragraph 60(j.1) of the Act upon transfer to a Registered Retirement Saving Plan ("RRSP"). However, the employer pays this retirement allowance out over a period of years.

Provided that the amounts are in fact retiring allowances and not a pension benefit, it is our view that the individual would include the amount of the retiring allowance received each year in income until the retiring allowance is paid out in full.  In addition, he may transfer an amount equal to the paymentsreceived in the year to an RRSP and deduct the contributions in accordance with paragraph 60(j.1) of the Act in each year after retirement until the retiring allowance is paid out in full.

We also confirm that the employer is not required to pay the entire amount of a retiring allowance in the year of retirement but could spread the payments over a period of months or years.

We trust the above comments will be of assistance to you.

Yours truly,

for Director Financial Industries DivisionRulings Directorate