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:
Whether or not payments in which pension benefits accrue are retiring allowance
Position TAKEN:
No they are employment income
Reasons FOR POSITION TAKEN:
Established position that if pension benefits continue to accrue there is an employment relationship
5-950521
XXXXXXXXXX M.P. Baldwin
April 3, 1995
Dear Sir:
Re: Retiring Allowance
This is in reply to your facsimile of February 24, 1995 and further to our telephone conversation of February 27,1995 (Baldwin/XXXXXXXXXX) in which you request an interpretation on whether or not particular payments made by your former employer is a retiring allowance that is eligible to be rolled over to an RRSP pursuant to 60(j.1) of the Income Tax Act (the "Act").
Written confirmation of the tax implications inherent in particular proposed transactions are given by this Directorate only where the transactions are outlined in an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R2. Questions concerning actual fact situations should otherwise be directed to your local district taxation office. As a consequence thereof, we can only offer the following general comments.
Where employment has been terminated and payments are being paid by the former employer as a salary continuation in which regular employment benefits continue, the Department generally considers that the employment relationship has not been terminated and that the payments are actually regular salary or wages and taxable as such. This is so even where the employee is not required to report to work. In particular, pension benefits can only accrue to persons who are employees and, therefore, their presence indicates that there is an employment relationship.
The Department is also of the opinion that in the situation where the employee is receiving salary and employment benefits for a stated period which will end at a particular termination date, a lump sum payable upon the employee finding new employment and in which all employment benefits cease, before the termination date will be considered a retiring allowance notwithstanding that the periodic payments are considered to be employment income.
We trust our comments will be of assistance to you.
Yours truly,
for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
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