17 September 1980 Income Tax Severed Letter ARE-554 - [Termination Payments VS Retiring Allowances]

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.

C.E. Darling (613) 995-0051

September 17, 1980

XXXX

Re: Termination Payments VS Retiring Allowances

We reply to your letter of September 3, 1980 wherein you requested an advance income tax ruling concerning payments received by you and two other individuals from your former employer.

Firstly, we are unable to discuss with you the income tax affairs of the other two individuals since we have not received any authority in writing from them to do so. We are bound by and must adhere to the confidentiality provisions of the Income Tax Act.

Secondly, we are unable to provide a binding advance income tax ruling since your question concerns a completed transaction, the payments of funds on the discontinuance of your employment. In accordance with paragraph 6 of Information Circular 70-6R (copy enclosed) rulings will be given only in respect of proposed transactions.

Notwithstanding the above, we offer the following comments concerning your own particular circumstances:

1. In our opinion the amount you received is a retiring allowance as defined in subsection 248(1) of the Income Tax Act, and taxable pursuant to subparagraph 56(1)(a)(ii). We view the amount as an amount "in respect of loss of office" in that your position was transferred to XXXX and you received what was described as a "generous severance policy" as a result of loss of employment.

1. Once an amount comes within the definition of a retiring allowance, it cannot also be considered a "termination payment" as described in subsection 248(1) by virtue of the following exclusion in subparagraph (a)(i) of that definition:

"---, other than (i) an amount required by any provision of this Act (other than subparagraph 56(1)(a)(viii)) to be included in computing the income of a taxpayer for the year,"

2. Retiring allowances constitute eligible income for either a transfer to a registered retirement savings plan or the purchase of an income-averaging annuity contract.

In accordance with your wishes re an oral discussion of this issue with us, we attempted to contact you on the telephone but were unable to reach you. If you require any further assistance please contact the writer at the telephone number indicated.

Since we were unable to provide an advance ruling, your $300 deposit will be returned under separate cover.

Yours truly,

for Director General Non-Corporate Rulings and Publications Directorate

CBD/jb 56(1)(a)(viii)

c.c. Montreal District Office