14 September 1982 Income Tax Severed Letter

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.

M.E. Bartley (613) 995-0051

September 14, 1982

XXXX

We reply to your letter of August 27 regarding the status of certain payments by the XXXX to employees in respect of their accumulated sick leave.

XXXX

The XXXX had a sick leave plan whereby on termination employees were entitled to receive a payment calculated by reference to the number of days of sick leave accumulated and unused at that time. These amounts have either been paid or are now payable. Your concern is with whether or not they are eligible for transfer to a registered retirement savings plan (RRSP) or income-averaging annuity contract (IAAC).

Initially we have to advise you that the budget of November 12, 1981 proposed changes to the amounts which may be transferred to an RRSP or to an IAAC. Retiring allowances may still be transferred to an RRSP but there will be limitations upon the amounts eligible for such a transfer. It is no longer possible, after 1981, to acquire an IAAC. Neither of these proposed amendments has been passed by Parliament but both will have retroactive effect if and when they receive Royal Assent.

In our opinion it is only if those payments represent retiring allowances that they qualified, or may qualify, for transfer to an RRSP. We considered this matter in 1980 at the time of the actual transfers of personnel and concluded that for those XXXX employees whose employment did not continue with either the XXXX the payments would be regarded as retiring allowances. The term "retiring allowance" is defined by subsection 248(1) of the Income Tax Act as "... an amount received upon or after retirement from an office or employment ..." and it can hardly be said that those whose employment continues will have retired.

Retiring allowances arising from retirements on or before November 12, 1981 are eligible for transfer to an RRSP in the year of receipt or within 60 days thereafter. Where the retirement occurs after that date the portion which may be transferred to an RRSP is limited to

(a) $2,000 times the number of years in which the recipient was employed with that employer,

plus,

(b) $1,500 times the number of years that the recipient was employed with that employer and in respect of which the employer made no contributions which vested in the employee to a registered pension plan or a deferred profit sharing plan.

The eligible amount may still be transferred to the RRSP in the year of receipt or within 60 days thereafter.

We do not know when the particular employees retired (if they have, in fact, retired) nor when they received amounts, but we trust that our comments will permit you to assist them in determining the amounts which they may transfer to an RRSP.

Yours truly,

for Director

Non-Corporate Rulings Division MEB:ta 56(1)(a)(ii) 60(j.1)