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: Whether salary or wages, which are to be received as a result of a collective bargaining agreement between the employer and its unionized employees will qualify under these new rules. An arbitrator was involved in the process, but only with respect to the interpretation of the agreement.
Position: No.
Reasons: Payments are not described by paragraph (a) of the definition of "qualifying amount" in section 110.2, i.e., received pursuant to an order or judgment of a competent tribunal, an arbitration award or a contract by which the payor and the individual terminate a legal proceeding.
XXXXXXXXXX J. Gibbons
2000-002907
Attention: XXXXXXXXXX
July 20, 2000
Dear XXXXXXXXXX:
We are replying to your facsimile of May 30, 2000, in which you requested our views concerning the application of the proposed new rules in section 110.2 of the Income Tax Act (the "Act") for the deduction of lump-sum amounts. In particular, you wish to know whether salary or wages, which are to be received as a result of a collective bargaining agreement between the XXXXXXXXXX (the "employer") and its unionized employees (the "employees"), will qualify under these new rules. You stated in your letter that an arbitrator was involved in the process, but only with respect to the interpretation of the agreement.
As requested, we have considered your enquiry and have provided some comments below. However, we cannot confirm the tax implications of particular transactions unless the transactions are proposed and are the subject matter of an advance ruling request submitted in the manner set out in Information Circular 70-6R3. Thus, our comments are of a general nature only.
Under paragraph (a) of the definition of "qualifying amount" in proposed section 110.2 of the Act, a lump-sum amount received as salary or wages will qualify as a qualifying amount if it is received pursuant to an order or judgment of a competent tribunal, an arbitration award or a contract by which the payor and the individual terminate a legal proceeding. In our view, the lump-sum amounts to be received by your employees pursuant to a collective bargaining agreement do not qualify under this paragraph, nor do they otherwise qualify under the definition of qualifying amount. Accordingly, it is our view that the lump-sum amounts to be received by your employees pursuant to a collective bargaining agreement will not qualify for the treatment under proposed section 110.2.
We trust that these comments will be of assistance.
Yours truly,
John Oulton
for Director
Business and Publications Division
Income Tax Rulings Directorate
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