30 November 1995 Ruling 9632893 - RETIRING ALLOWANCE

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 the amount being paid is a retiring allowance within the meaning of subsection 248(1) and whether the payment is reasonable within the parameters of section 67?

Position:

Yes

Reasons:

Routine

XXXXXXXXXX							3-963289
XXXXXXXXXX

Attention: XXXXXXXXXX

XXXXXXXXXX, 1996

Dear Sirs:

Re: XXXXXXXXXX
Advance Income Tax Ruling

We are writing in reply to your letter of XXXXXXXXXX wherein you requested certain advance income tax rulings (the "Rulings") on behalf of your clients XXXXXXXXXX.

You have advised us that to the best of your knowledge and that of XXXXXXXXXX none of the issues involved herein are being considered by a Tax Services Office or Taxation Centre of Revenue Canada in connection with a tax return already filed and that none of the issues are under objection or appeal.

FACTS

The social insurance number and corporate account number with Revenue Canada (where applicable) for the above-listed taxpayers are as follows:

XXXXXXXXXX

XXXXXXXXXX is the Tax Services Office serving both taxpayers.

XXXXXXXXXX is the result of an amalgamation on XXXXXXXXXX

XXXXXXXXXX was incorporated in XXXXXXXXXX and continued under the provisions of the XXXXXXXXXX.

The predecessor, XXXXXXXXXX was incorporated under the provisions of the XXXXXXXXXX on XXXXXXXXXX

At all relevant times, all of the issued share capital of XXXXXXXXXX has been owned by XXXXXXXXXX

XXXXXXXXXX has an XXXXXXXXXX year end.

XXXXXXXXXX is a Canadian resident and was born on XXXXXXXXXX

Since XXXXXXXXXX or one of its predecessors has carried on the business as a XXXXXXXXXX.

XXXXXXXXXX has been XXXXXXXXXX only employer.

XXXXXXXXXX has always been the owner/manager of XXXXXXXXXX.

At all times XXXXXXXXXX has carried on the function of
XXXXXXXXXX

XXXXXXXXXX ceased to carry on XXXXXXXXXX business in XXXXXXXXXX, but continues to earn income from the rental of real property.

XXXXXXXXXX has continued to be employed by XXXXXXXXXX in performing administrative tasks such as collecting rents and hiring trades for general maintenance of the real property for no remuneration.

XXXXXXXXXX has been employed by XXXXXXXXXX or one of its predecessors since XXXXXXXXXX and has earned gross income from the employment in the following amounts:

		Year     Income             Year       Income

XXXXXXXXXX

(* AMOUNTS ARE MAXIMUM PENSIONABLE EARNINGS NOT T4 GROSS INCOME AMOUNTS; ACTUAL AMOUNTS ARE UNAVAILABLE FOR THESE YEARS, HOWEVER GROSS INCOME FOR THESE YEARS IS EQUAL TO OR GREATER THAN THESE AMOUNTS.)

11.XXXXXXXXXX and its predecessors have never made any contributions to a pension fund (other than to the Canada Pension Plan) or to a deferred profit sharing plan on behalf of XXXXXXXXXX.

PROPOSED TRANSACTION

12.XXXXXXXXXX will retire from XXXXXXXXXX but will continue to perform certain administrative duties for XXXXXXXXXX (such as collecting rents and hiring trades for general maintenance of the real property) for which no remuneration or director's fee will be received. XXXXXXXXXX will continue rendering this service until the remaining real property of XXXXXXXXXX is sold and XXXXXXXXXX is wound-up.

13.In recognition of his years of service to XXXXXXXXXX and its predecessors, XXXXXXXXXX will pay a retiring allowance (the "Retiring Allowance") to XXXXXXXXXX upon his retirement in XXXXXXXXXX

14.The total amount of the Retiring Allowance will be $XXXXXXXXXX, in recognition of XXXXXXXXXX years of full time employment.

15.XXXXXXXXXX will pay the full $XXXXXXXXXX Retiring Allowance directly to a Registered Retirement Savings Plan of which XXXXXXXXXX is the annuitant.

RULINGS

Provided the above statement of facts and proposed transactions are accurate and constitute a complete disclosure of all the relevant facts and the transactions are completed as proposed, we rule as follows:

A.The amount of $XXXXXXXXXX to be paid to XXXXXXXXXX will qualify as a retiring allowance as defined in subsection 248(1) of the Act and will be included in his income in the year of receipt under subparagraph 56(1)(a)(ii) of the Act.

B.XXXXXXXXXX will be entitled to a deduction under paragraph 60(j.1) of the Act to the extent permitted by that paragraph on the payment of the Retiring Allowance to a registered retirement savings plan of which he is the annuitant.

C.The full amount of the Retiring Allowance will be deductible in determining the income of XXXXXXXXXX for the taxation year for which it is paid and will be considered reasonable for the purpose of section 67 of the Act.

These rulings are given subject to the general limitations and qualifications set forth in Information Circular 70-6R2 dated September 28, 1990, as amended by Special Release dated September 30, 1992, issued by Revenue Canada, and are binding provided the proposed transactions are completed on or before XXXXXXXXXX.

These rulings are based on the Act and the Regulations as of the date of this ruling letter without taking into account any future amendments thereto, whether currently proposed or not.

Yours truly,

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