30 November 1996 Ruling 9710763 - 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 an amount paid to retired employee by employer is a retiring allowance, deductible to employee to extent permitted by 60(j.1) upon payment to an RRSP, and deductible to employer within 180 days of year end for which deduction is to be taken.

Position:

Yes.

Reasons:

Purpose and amount of payment satisfies criteria in "retiring allowance" definition, upon transfer to RRSP of employee in accordance with 60(j.1) conditions the roll is available, and amount is reasonable and deductible under section 67, section 9 and in accordance with 78(4).

XXXXXXXXXX							971076
XXXXXXXXXX

Attention: XXXXXXXXXX

XXXXXXXXXX, 1997

Re: Advance Income Tax Ruling
Payment of Retiring Allowance by
XXXXXXXXXX

This is in reply to your letters of XXXXXXXXXX, and in which you request an advance income tax ruling on behalf of the above-named taxpayers and further to our telephone conversation XXXXXXXXXX.

FACTS

1.The Employee resides at XXXXXXXXXX and is served by the XXXXXXXXXX Tax Services Office and the XXXXXXXXXX Tax Centre.

2. XXXXXXXXXX.

3.XXXXXXXXXX and the Employee were married in XXXXXXXXXX.

4.From XXXXXXXXXX, the Employee was employed full-time by the Employer. As an employee of the Employer, the Employee carried out XXXXXXXXXX. Her level of responsibility was significantly reduced after the practice was sold by the Employer.

5.During her employment with the Employer XXXXXXXXXX, the Employee received an annual salary in the amounts listed below:

		YEAR		   SALARY		YEAR		  SALARY

XXXXXXXXXX

6.Since XXXXXXXXXX, the Employee has not been employed by the Employer.

PROPOSED TRANSACTIONS

7.In recognition of her years of service to the Employer, the Employer has agreed to pay a retiring allowance to the Employee equal to $XXXXXXXXXX for each year of employment with the Employer from XXXXXXXXXX inclusive (XXXXXXXXXX years) and $XXXXXXXXXX for each year of employment with the Employer for the years XXXXXXXXXX inclusive (XXXXXXXXXX years). The total amount of the retiring allowance is $XXXXXXXXXX. Subject to receiving a favourable advance income tax ruling, the Employer will pay, within XXXXXXXXXX, the retiring allowance of $XXXXXXXXXX directly to a registered retirement savings plan ("RRSP") of which the Employee is the annuitant. The Employee and Employer have agreed that the Employee will not be employed by the Employer at any time in the future.

OTHER INFORMATION

8.To the best of the Employee's and Employer's knowledge none of the issues involved in this ruling request is being considered by a taxation services office or tax centre in connection with any tax returns filed and none of the issues is under objection or appeal.

RULINGS

Provided that the facts and proposed transactions as described in your submission and as summarized above are accurate and constitute a complete disclosure of all the relevant facts and proposed transactions, we rule as follows:

A.The proposed payment will qualify as a "retiring allowance" as defined in subsection 248(1) of the Income Tax Act (the "Act"), and will be included in the Employee's income in the year of receipt under subparagraph 56(1)(a)(ii) of the Act.

B.The Employee 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 an RRSP of which she is the annuitant.

C.The full amount of the retiring allowance will be deductible in determining the income of the Employer for its taxation year ending XXXXXXXXXX, and will be considered reasonable for the purpose of section 67 of the Act.

The above advance income tax rulings are given subject to the limitations and qualifications set forth in Information Circular 70-6R3 dated December 30, 1996, issued by Revenue Canada, and are binding on Revenue Canada provided the retiring allowance is paid within XXXXXXXXXX.

Yours truly,

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