5-911292
Dear Sirs:
This is in reply to your letter of May 9, 1991
Your letter concerns the reference to "or a person related to the employer" set out in subparagraph 60(j.1)(ii) of the Income Tax Act (the "Act"). With respect thereto, you cite certain hypothetical facts and ask us to confirm that service with the previous employer will count in computing the number of years for the purposes of subparagraph 60(j.1)(ii) of the Act.
Your enquiry appears to relate to specific taxpayers involved in specific transactions, either completed or proposed. As indicated in paragraph 21 of Information Circular 70-6R2, 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 that Circular. 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.
For the purposes of subparagraph 60(j.1)(v) of the Act, it is a question, of fact whether or not the employer paying the retiring allowance has acquired or continued the business of a former employer. Where the former employer carried on a number of businesses, the acquisition or continuation of only one of those businesses would suffice for the purposes of subparagraph 60(j.1)(v) of the Act. The comments in Interpretation Bulletin IT-206R will assist in determining if the former employer carried on a number of businesses.
A business of a former employer need not be continued directly. That is, it may have been continued by an interim person before being continued by the employer paying the retiring allowance.
For the purposes of subparagraph 60(j.1)(iv) of the Act, a parent and its subsidiary are two different persons. Thus, if the subsidiary is the employer that pays the retiring allowance, it is the subsidiary that must have acquired or continued the business of the former employer.
A determination of whether or not subparagraph 60(j.1)(iv) or (v) of the Act applies in a given situation is made at the time the retiring allowance is paid. For example, whether or not service with a previous employer influences the retiree's pension benefits would normally be determined at the time of retirement.
The above comments are an expression of opinion only and are not binding on the Department, as explained in paragraph 21 of Information Circular 70-6R2. we trust however that they are of assistance.
Yours truly,
for DirectorFinancial Industries DivisionRulings Directorate