| 19(1) | File No. 5-9251 |
| A. Humenuk | |
| (613) 957-2135 |
February 5, 1990
Dear Sirs:
Re: 19(1), 24(1)
We are replying to your letter of December 11, 1989, concerning the proposed settlement being offered to the above noted individuals by the above noted corporation.
24(1)
We do not generally offer opinions on proposed transactions except by way of an advance income tax ruling. The attached Information Circular 70-6R "Advance Income Tax Rulings" outlines the procedure for obtaining such a ruling. Please note that the current rate is $65 per hour. Furthermore, we are unable to discuss the tax implications of a transaction of specific taxpayers without written authorization from the taxpayers involved. However we would like to present the following general comments.
It is a question of fact as to whether or not any particular amount will or will not form part of a retiring allowance as defined in subsection 248(1) of the Income Tax Act (the "Act"). Accordingly, our lack of comment on the balance of the settlement should not be interpreted as concurrence with your determination.
It is our view that the reimbursement of legal fees which were essential to incur in respect of the conduct of an action in wrongful dismissal is, to the extent that such costs were actually incurred by the recipient, not considered to form part of a retiring allowance. Provided that Bill C-28 is enacted in substantially the same form as passed by the House of Commons on December 20, 1989, such an amount will be included in the recipient's income under proposed paragraph 56(1)(1.1) of the Act and an offsetting deduction will be allowed to the extent permitted under proposed paragraph 60(o.1) of the Act.
The employer would be entitled to a deduction in respect of the proposed payments provided that the amounts were reasonable in circumstances and not otherwise prohibited.
We caution that these comments do not constitute a ruling and are not binding on the Department.
Yours truly,
P.D. Fuocofor DirectorBusiness and General DivisionSpecialty Rulings DirectorateLegislative and Intergovernmental Affairs Branch
Enclosure
c.c. Vancouver District Office