12 September 1995 External T.I. 9522685 - RA PAID AFTER 1995, NEW LIMIT

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:

Can an amount still be deducted under subsection 60(j.1) after 1995?

Position TAKEN:

Yes

Reasons FOR POSITION TAKEN:

The proposed legislation described in the Amendments to the Income Tax Act and Related Statutes issued in July 1995 only amends paragraph 60(j.1) so that the limit on the amount that can be deducted is determined without taking into account years of employment after 1995.

				952268
XXXXXXXXXX	M.P. Sarazin

September 12, 1995

Dear Sir:

Re: Retiring Allowance Paid Subsequent to 1995

This is in reply to your letter dated August 10, 1995 concerning the above noted topic. Your query relates to a specific individual and transaction. As indicated in Information Circular 70-6R2, we do not express opinions on specific proposed transactions other than as a reply to an advance income tax ruling request.

Although we cannot confirm that any payment you have described could be considered a "retiring allowance" within the meaning of subsection 248(1) of the Income Tax Act (the "Act"), we can offer the following general comments.

To address your specific concern regarding the proposed amendment to paragraph 60(j.1) of the Act described in Amendments to the Income Tax Act and Related Statutes: Draft Legislation and Explanatory Notes issued in July 1995, the fact that an amount is to be paid subsequent to 1995 in settlement of a claim for damages in respect of a pre-1996 loss of office or employment does not, in and by itself, disqualify a taxpayer from deducting an amount under paragraph 60(j.1) of the Act with respect to any retiring allowance received after 1995.

If an employee agrees to a settlement for damages resulting from the loss of office or employment and the retiring allowance is being paid in a later year, the amount of retiring allowance received in the year may be deducted from income in accordance with proposed paragraph 60(j.1) of the Act if it:

(a)is included in income for the year under subparagraph 56(1)(a)(ii) of the Act;

(b)is designated by the recipient in the income tax return for the year;

(c)(in the case where the recipient was a member of the employer's pension or deferred profit sharing plan) does not exceed the amount by which $2,000 times the number of years employed before 1996 exceeds all amounts deducted under 60(j.1) in the year or in previous years with respect to amounts paid by the same employer; and

(d)does not exceed the amount paid by the recipient to the registered retirement savings plan in the year or within 60 days thereof, and only to the extent that it was not deducted in computing the recipient's income for a preceding taxation year.

We trust the above comments will be of assistance to you.

Yours truly,

for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch