March 4, 1991
Dear Sir:
This is in reply to your letter of December 7, 1990 asking whether a particular payment you will receive is a retiring allowance.
24(1)
Where a taxpayer wishes to know the tax consequences of a proposed transaction, a formal request for an advance income tax ruling should be made, as outlined in Information Circular 70-6R2 which has been enclosed. However, we are providing you with the following general comments which we hope will be of assistance to you.
The Department's general position on retiring allowances is set out in Interpretation Bulletin IT-337R2 which has been enclosed. In particular, paragraph 2 includes the definition of a retiring allowance while paragraph 3 states that for an amount to be a retiring allowance, the Department, subject to the exceptions in paragraph 4, "accepts cessation of employment for any reason as being retirement ..." In addition, the fact that an individual is working for an employer other than the one from whom the allowance is received will not, in and by itself, prevent the allowance from being a retiring allowance. However paragraph 4 indicates that retirement or loss of employment does not include termination of employment (other than mandatory retirement) with an employer followed shortly by employment with an affiliate of the former employer. The same result (other than mandatory retirement) would occur if an individual commenced employment with the affiliate before he ceased employment with the other employer. The Department considers that mandatory retirement occurs where an employee is required to retire from his employment position.
We trust you will find the foregoing satisfactory.
Yours truly,
for DirectorBusiness and General DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch