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: What happens if employee takes early retirement, and does not return to work for period equal to period of leave?
Position: Taxable as soon as it is known that employee will not return to work for specified period.
Reasons: Condition of 6801(a)(v) no longer met.
XXXXXXXXXX
October 7, 1999
Dear XXXXXXXXXX:
Mr. Rob Wright, Deputy Minister of National Revenue, has asked me to reply to your letter of July 16, 1999, concerning your teacher-funded leave.
Specifically, you will be commencing your one-year leave of absence in September 1999, but wish to retire in December 2000; therefore, you will be returning to work for a period of only four months instead of the required period equal to the leave of absence, namely a period of one year.
Paragraph 6801(a) of the Income Tax Regulations sets out the rules governing Deferred Salary Leave Plans (DSLPs), such as your teacher-funded leave program. Subparagraph 6801(a)(v), in particular, requires that the plan provide that "the employee is to return to his regular employment with the employer or an employer that participates in the same or a similar arrangement after the leave of absence for a period that is not less than the period of the leave of absence".
As long as all the conditions contained in paragraph 6801(a) of the Regulations are satisfied, an employee will not be subject to tax on the deferred amounts in the years the amounts are deferred. However, at the time that one or more of the conditions are not satisfied, for example if the employee knows that she will be unable to return to work for a period of time equal to the period of the leave of absence, the deferred amounts and any unpaid interest, whether paid to the employee or not, are taxable as employment income in that year.
We trust that the above will assist you with your retirement plans.
Yours sincerely,
Bill McCloskey Assistant Deputy Minister Policy and Legislation Branch
S.E. Thomson
952-9853
September 29, 1999
992375