23 January 2001 External T.I. 2001-0065195 - Retiring Allowance Eligible for Rollover

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 retiring allowance eligible for rollover under 60(j.1)?

Position: Question of fact

Reasons: Completed transactions are handled by the TSO.

XXXXXXXXXX 2001-006519
S. E. Thomson
January 23, 2001

Dear XXXXXXXXXX:

Re: Transfer of Retiring Allowance to RRSP

We are writing in response to a letter that you wrote to the Sudbury Tax Services Office on December 14, 2000, a copy of which was sent to Patricia Spice of our directorate.

For your information, we would like to outline the provisions of the legislation relevant to your severance amount. From our records, this outline was generally the subject of your conversation with Ms. Spice on February 28, 2000.

1. Whether a "severance package" is a retiring allowance taxable under subparagraph 56(1)(a)(ii) of the Income Tax Act (the "Act"), or is salary taxable under section 5 or 6 of the Act is a question of fact. For more information in this regard, please refer to our interpretation bulletin IT-337R3 Retiring Allowances available on our website at www.ccra-adrc.gc.ca.

2. A taxpayer is entitled to a deduction under paragraph 60(j.1) of the Act for such portion of the retiring allowance as is transferred to the taxpayer's RRSP in the year or within 60 days after the end of the year, subject to certain limits.

3. The limits referred to in 2 above are, inter alia, $2,000 per year before 1996 during which the employee was employed by the employer or a person related to the employer.

4. Legal fees paid by the taxpayer to collect or establish a right to a retiring allowance may be deductible under clause 60(o.1)(i)(B) of the Act, again, subject to certain limits. Please refer to paragraph 10 of IT-337R3. These legal fees must be distinguished from legal fees relating to a division or settlement of property arising out of, or on a breakdown of, a marriage.

Any evidence that you have to support that you were employed by the employer or a person related to the employer for the years in question (for example, photocopies of T4-slips) should be provided to the Tax Services Office.

Please note that the responsibility for determining the appropriate tax consequences of a completed transaction lies with the Tax Services Office. The above information is for your assistance only, although we would be pleased to assist the Tax Services Office with any enquiries they may have.

Yours truly,

Roberta Albert, CA
for Director
Financial Industries Division
Income Tax Rulings Directorate