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: The taxation of a retiring allowance.
Position: Taxed in the year of receipt.
Reasons: Subparagraph 56(1)(a)(ii)
MINISTER 97-03230M
DEPUTY MINISTER'S OFFICE (2)
ADM'S OFFICE (2)
PENDING
RETURN TO INCOME TAX RULINGS
AND INTERPRETATIONS DIRECTORATE
15TH FLOOR, ALBION TOWER
Signed on July 10, 1997
XXXXXXXXXX
Dear XXXXXXXXXX:
I am responding to your letter of May 2, 1997, written on behalf of your constituent, XXXXXXXXXX, that was addressed to the Honourable Jane Stewart, former Minister of National Revenue, concerning the taxation of severance pay that he received upon retirement from Revenue Canada.
I understand that XXXXXXXXXX believes that the payment he received should be treated as an amount from a retirement compensation arrangement (RCA) rather than as a retiring allowance. In addition, he believes that amounts received out of an RCA are taxed differently.
As mentioned by your constituent, a retiring allowance is a payment received on or after retirement for either long service or for loss of an office or employment. I would clarify that an RCA is a plan or arrangement whereby an employer pays an amount at some future date, usually after retirement, to a third party for the benefit of an employee. Further, amounts received from an RCA or a retiring allowance are both included in the recipient's income in the year or receipt and are taxable at the same rate.
I would like to explain that a severance payment upon retirement from the Public Service is normally paid in respect of a loss of employment and is a retiring allowance. As a result, I have to confirm that your constituent was assessed correctly by the Department.
I trust these comments will clarify the matter for XXXXXXXXXX.
Yours sincerely,
Herb Dhaliwal, P.C.,
Frank Gillman
952-9853
971270
May 23, 1997
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