Principal Issues: Is the payment of an amount to an employee to compensate the employee for their loss of employment where the employee is re-employed with the employer in another position prior to resigning from the employee's current position, a retiring allowance for purposes of the Act?
Position: Question of fact. However, it appears that the payment would not be a retiring allowance that is eligible for transfer to the employee's RRSP and a deduction in accordance with paragraph 60(j.1) of the Act would not be allowed.
Reasons: Position concerning retiring allowances outlined in paragraph 3 of IT-337R3.
XXXXXXXXXX 2004-009545
G. Moore
December 10, 2004
Dear XXXXXXXXXX:
RE: Request for technical interpretation - Eligible Retiring Allowance
This is in reply to your letter of September 8, 2004, requesting our views regarding the receipt by an employee of an allowance and whether it qualifies as a "retiring allowance" as defined in subsection 248(1) of the Income Tax Act (the "Act"). We also acknowledge information provided in a telephone conversation of November 12, 2004 (Moore/XXXXXXXXXX).
The particular situation outlined in the letter relates to a factual one, involving a specific taxpayer. As explained in Information Circular 70-6R5, it is not this Directorate's practice to comment on proposed transactions involving specific taxpayers other than in the form of an advance income tax ruling. However, we are prepared to offer the following general comments, which may be of assistance.
The Canada Revenue Agency's views regarding retiring allowances are provided in Interpretation Bulletin IT-337R4, Retiring Allowances. For purposes of the definition of retiring allowance, retirement or loss of an office or employment does not include a transfer from one office or position to another with the same employer (or an affiliate) in a different capacity (including one with diminished responsibilities), or termination of employment with an employer followed by re-employment with the employer (on a full or part-time basis) or employment with an affiliate of the employer pursuant to an arrangement made prior to the termination of employment. In our view, where an employee working full-time for an employer is promoted to a new full-time position with the same employer, any allowance received by the employee would not qualify as a "retiring allowance" for purposes of subsection 248(1) of the Act.
I trust these comments will be of assistance.
Yours truly,
Roxane Brazeau-LeBlond, CA
for Director
Financial Industries Division
Income Tax Rulings Directorate