12 January 1990 Income Tax Severed Letter AC74377 - Settlement Payment

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.

JAN 12 1990

Assessing and Enquiries Directorate          Business and General
P. McNally, Director                           Division
Enquiries and Taxpayer Assistance            A. Humenuk
  Division                                   957-2135

Norm O'Donnell

24(1)                                        7-4378
                                  Your File: HAV 5804-2 

We are replying to your memorandum received September 29, 1989, concerning the characterization of a payment made in settlement of a claim against the above noted employer. Reference is also made to our various telephone conversations (Ouellette/Humenuk).

Our understanding of the facts is as follows:

24(1)

24(1)

From your review of the facts presented, you came to the conclusion that the affected employees did receive a settlement for loss of employment. However since they were also offered the opportunity to be reinstated , you have asked whether this fact would affect the nature of the payment to be received.

In our view, the fact that the board ordered the employer to reinstate the employees effectively means that no loss of employment occurred as of the date of the layoff despite the formal notifications issued in September and November of 1983. As we understand the situation, the employer was willing and able to reinstate the employees as of July 1, 1988, and the payment received was in respect of the period prior to that date. Consequently, it is our view that this amount is employment income pursuant to subsection 5(1) and/or 6(3) of the Act and that the amount cannot be considered a retiring allowance.

We trust our comments will be of assistance to you.

B.W. Dath Director Business and General Division Specialty Rulings Directorate Legislative and Intergovernmental Affairs Branch