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.
March 13, 1987 Financial Industries Division Deferred Income Plans and Trusts Section G. Kauppinen 957-3495
This is in reply to your memorandum dated February 6, 1987 regarding the exchange of correspondence between XXXX and the Toronto District Office.
Your question is in regard to "golden handshake" bonuses which are offered as an inducement to XXXX employees to retire early when they are then subsequently re-employed for overseas postings. In some cases employees could be retired from XXXX for six to nine months before they are re-hired and posted overseas.
Specifically, you have asked our opinion regarding the applicability of paragraph 4 of IT-337R2 to these amounts.
In our opinion, a reasonable approach would be to examine the facts of each case. If an employee is offered early retirement with a "golden handshake bonus", and at-that time accepts a specific overseas assignment, then we would consider that employee not to have retired even if there is a delay before he is actually posted overseas (which we would consider to be a leave of absence). In these circumstances, the bonus would not be a retiring allowance for the purposes of paragraph 60(j.1) of the Act unless the receipt thereof was postponed until the employee completed the overseas assignment and severed all contractual employment with XXXX If the bonus was received by the employee prior to the time it would be taxed as ordinary employment pursuant to sections 5 and/or 6 of the Act in the year of receipt.
In circumstances where an employee retires, subsequently receives a bonus and at the time he retires there is no definite prospect for his being subsequently assigned overseas but only the possibility that this might occur then, in our opinion, the bonus would be a retiring allowance when received for the purposes of paragraph 60(j.1) of the Act. The subsequent re-employment of a former employee for overseas assignment under these circumstances would not, in our opinion, affect the original characterization of the amount received by such a former employee as a retiring allowance.
Chief Deferred Income Plans & Trusts Section Financial Industries Division
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