12 December 1989 Income Tax Severed Letter AC59066 - Retiring Allowances

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.

19(1)                                        5-9066
                                             M. Shea-DesRosiers
                                             (613) 957-8953

December 12, 1989

Dear Sirs:

Re: Retiring Allowances

This is in reply to your letter of November 10, 1989 and further to our telephone conversation 19(1) Shea-DesRosiers) of November 20, 1989.

24(1)

Your first and second questions, as you explained in the above-mentioned telephone conversation, are both to the same effect:

1. & 2.   If the company gives an employee a notice of
          termination, for example of one (1) month, but tells
          the employee if you leave immediately we will pay you
          for that month in addition to the amount in respect of
          the termination of employment, will that additional
          amount constitute a "retiring allowance"?

          It is our opinion that as long as the amount is paid
          after the employee has left his employment, the sum of
          money in lieu of the month's notice will be considered
          a retiring allowance.

3.        As Interpretation Bulletin T-337R2 states, a payment
          will be considered a retiring allowance if it is in
          recognition of long service or in respect of loss of an
          office or employment. It also stipulates that a payment
          in respect of unused sick leave credits qualifies as a
          retiring allowance. These constitute the payments that
          will be considered as retiring allowances.

4.        Retiring allowances need not be paid in a lump sum
          amount but  may be paid over several months or years by
          way of fixed periodic amounts.

          With respect to the rollover provisions of paragraph
          60(j.1) of the Income Tax Act (the "Act"), subparagraph
          60(j.1)(ii) of the Act currently provides for the
          tax-free transfer of a retiring allowance into an RRSP
          up to a limit of $2,000 for each year of service in
          which the employee acquired benefits under a Registered
          Pension Plan or Deferred Profit Sharing Plan plus and
          additional $1,500 for each year of service with not
          such benefits.  Proposed legislation will limit the
          amount of retiring allowance an individual may rollover
          to an RRSP to $2,000 per year of service effective for
          years of service after 1988.

The foregoing is an expression of opinion only, and as such, it is not binding on the Department. We trust, however, that our comments will be of assistance.

Yours truly,

for Director Financial Industries Division Rulings Directorate