16 October 1989 Ministerial Letter 74318 F - Whether Lump-sum Payment Constitutes Retiring Allowance

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.

Subject:  Whether Lump-Sum Payment constitutes Retiring Allowance

This is in reply to your memorandum of September 7, 1989 with attached T2020 and a copy of the 24(1)

You describe the facts as follows:

24(1)

The question raised was whether the payment of 24(1) to each employee was retiring allowance.

It is our opinion that there is no loss or termination of employment since the employees continue to work for the same employer, and therefore the amounts paid to the employees out of the Stock Plan do not qualify as retiring allowances as defined in subsection 248(1) of the Income Tax Act.

It is also our opinion that the amounts received by the said employees do not qualify for a transfer to an RRSP.  For these amounts to have qualified, the would have to have been received out of or under a registered pension fund or plan and transferred directly to the employee's RRSP.  Effective January 1, 1989, lump sum amounts may be transferred between plans only on a direct plan-to-plan basis.

The employees will have to declare the amounts received as income and pay the tax since no tax has been withheld by the employer.

for DirectorFinancial Industries DivisionRulings Directorate