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: Is an RCA created by virtue of an employer's lump sum payment to survivors of an employee who was killed while on duty?
Position: No.
Reasons: Payment because of employee's death. No obligation on the part of the employer to make the payment. No restrictions on use of funds by the survivors.
982461
XXXXXXXXXX G. Kauppinen
(613) 957-9871
Attention: XXXXXXXXXX
March 8, 1999
Dear Sirs:
Re: Retirement Compensation Arrangement
This is in reply to your letter dated September 22, 1998 and further to our telephone discussions (XXXXXXXXXX/Kauppinen) wherein you requested our opinion as to whether a payment by a corporation to the survivors of an employee who was killed while performing the duties of his employment would constitute a retirement compensation arrangement (“RCA”) as defined in subsection 248(1) of the Income Tax Act (the “Act”).
Your question relates to a specific proposed transaction and therefore should be the subject of a formal request for an advance income tax ruling. We may, however, provide the following general comments which are not binding on the Department.
If the payment is made solely as a result of the death of the employee and was not part of any obligation (implied or otherwise) entered into by the employee and the corporation prior to his death, then it is our opinion that the payment would not constitute a contribution to an RCA.
We make no additional comment as to the character of the payment for the purposes of the Act. In particular, we do not opine as to the deductibility of the payment to the employer or the taxability of the payment to the recipient survivors.
We trust our comments are of assistance.
Yours truly,
Paul Lynch
for Director
Financial Industries Division
Income Tax Rulings
and Interpretations Directorate
Policy and Legislation Branch
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