5-911571
Dear Sirs:
Re: Retiring Allowance Paragraph 60(j.1) and Subsection 248(1) of the Income Tax Act (the "Act")
We are writing in reply to your letter of May 28, 1991, in which you ask our opinion concerning a particular termination settlement, and the impact of Serafini v, MNR (89 DTC 653) on the Department's interpretation of the above-noted provisions of the Act.
Written confirmation of the tax implications inherent in particular transactions are given by this Directorate only where the transactions are proposed and are the subject matter of an advance ruling request submitted in the manner set out in Information Circular 70-6R2. Where the particular transactions are completed, the enquiry should be addressed to the relevant District Taxation Office. The following comments are, therefore, of a general nature only, and are not binding on the Department.
We take the view that in a case where pension benefits continue to accrue or normal employee benefits continue to be enjoyed by an individual, it is unlikely that employment has ceased even though the individual is not required to report for work. In our opinion this holds true even where the individual did not choose, but rather was forced, to leave. Thus, amounts received during this period of leave from employment would not be considered a retiring allowance within the meaning of subsection 248(1) of the Act, nor would they qualify for a tax-free transfer to the recipient's RRSP under paragraph 60(j.1) of the Act.
We can confirm, however, that if it is established that an employee has retired or been terminated, the amounts received as a retiring allowance can be paid in one lump sum or in instalments. Furthermore, a payment after retirement or termination, in respect of unused sick leave credits, will qualify as a retiring allowance.
Yours truly,
for DirectorFinancial Industries DivisionRulings Directorate