5-903031
Dear Sir:
Re: Retiring Allowance
This is in reply to your letter of September 14, 1990 wherein you requested an advance income tax ruling. We cannot provide an advance income tax ruling as the transaction described is a completed transaction. However, we are prepared to offer the following general comments.
For severance payments to quality as a retiring allowance the payment must be in recognition of long service or in respect of loss of an office or employment. Paragraph 60(j.1) of the Income Tax Act (the Act) provides for a deduction for retiring allowances received and transferred to a registered retirement savings plan (RRSP) under which the recipient is the annuitant. The deduction is limited to the least of
1) the amount of the retiring allowance paid to you in the year and
2) the aggregate of
A) $2,000 times the number of years during which you were employed by the employer or a person related to the employer, and
B) $1,500 times the number of years before 1989 calculated in A exceeds the equivalent number of years that employer contribution to a registered pension plan had vested.
Based on the formula above and the facts in your letter the amount of your retiring allowance that can be transferred to an RRSP is As you received $ 24(1) as a severance payment the remaining 24(1) must be included as income from employment in your 1990 personal income tax return.
We trust the above comments will be of assistance to you.
Yours truly,
for DirectorFinancial Industries DivisionRulings Directorate