Principal Issue: [TaxInterpretations translation]
Is an end of career allowance included in earned income under subsection 146(1) if the taxpayer continues to carry on the business outside of RAMQ?
Position:
Yes.
Reason:
The business continued to be carried on. In addition, it would be difficult to claim that it is a separate business. F9533185
July 10, 2000
Jonquière Tax Centre Headquarters
Financial Industries Division
Attention: Ghyslaine Larouche
L. J. Roy, CGA2000-002290
End-of-career allowance
This is further to your fax of April 18, 2000, in which you asked for our opinion on the situation described below.
The taxpayer is a physician living in Quebec. On XXXXXXXXXX, he took advantage of an end-of-career allowance program and is receiving this allowance over a period of XXXXXXXXXX years. The annual amount of the allowance is $XXXXXXXXXX. Although under this program he was no longer entitled to practise his profession under the Régie de l'assurance-maladie du Québec (RAMQ), he continued his business by working as a physician at XXXXXXXXXX during the XXXXXXXXXX period. In XXXXXXXXXX, the RAMQ recalled the physicians who had benefited from the program to resume working as physicians under contract as retired physicians. Consequently, since XXXXXXXXXX, the taxpayer has been accepting contracts both in XXXXXXXXXX and in Quebec. According to the taxpayer, he has never stopped carrying on his business.
Question
Can the annual end-of-career allowance received by the taxpayer and included in computing income under paragraph 12(1)(x) of the Income Tax Act (the “Act”) be included in computing earned income under subsection 146(1) of the Act?
Our Comments:
Under subsection 146(1), a taxpayer's earned income includes, among other things, income for a period in the year throughout which the taxpayer was resident in Canada from a business carried on by the taxpayer either alone or as a partner actively engaged in the business.
As stated in the interpretations you cited, whether a taxpayer carries on a business is a question of fact that can only be resolved after an examination of all the relevant facts. In general, a business is not carried on if the taxpayer has ceased all normal activities of the business and a resumption of activities in the near future is unlikely.
In the situation you have presented to us, it appears that the taxpayer has not ceased to carry on the business. Consequently, we are of the view that the annual end-of-career allowance could be included in earned income under subsection 146(1).
For your information, a copy of this memorandum will be severed using the Access to Information Act and will be available in the Legislative Access Database (LAD) located on the mainframe of the Canada Customs and Revenue Agency. A severed copy will also be distributed to the commercial tax publishers for inclusion in their databases. The severing process will remove all material that is not subject to disclosure, including information that could disclose the identity of the taxpayer. Should your client request a copy of this memorandum, the Legislative Access Bank version can be provided. Alternatively, the client may request a severed copy using the Privacy Act criteria, which does not remove client identity. Requests for this latter version should be made by you to Ms. Jackie Page at (819) 994-2898. A copy that has been severed in accordance with the Privacy Act will be sent to you for delivery to the client.
Acting Manager
Financing and Plans Section
Financial Industries Division
Income Tax Rulings Directorate
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