5-910409
Dear Sirs:
Re: Retiring Allowances
In your letter of February 5, 1991, you asked whether there is any requirement for an employee to receive a salary in a year in order to be eligible to have a retiring allowance transferred directly to an RRSP. You refer specifically to a client:
24(1)
The interpretation you seek relates to a specific taxpayer and, therefore, we bring to your attention Information Circular 70-6R2 dated September 28, 1990 issued by Revenue Canada, Taxation and the relates Special Release thereto. Confirmation with respect to proposed transactions involving specific taxpayers will only be provided in response to a request for an advance income tax ruling. If you wish to obtain an advance income tax ruling for a particular taxpayer with respect to specific transactions which are contemplated, a written request for an advance income tax ruling can be submitted in accordance with the Information Circular. Nevertheless, we can offer the following, general comments.
A payment made to an individual after he has retired and in the circumstances which you describe would likely be considered to be salary or wages, and not a retiring allowance. Where a low or no salary was received before retirement, an amount received after retirement can reasonably be considered to be deferred compensation, taxable as income from office or employment when received. Thus, the amount would be included in the individual's income for that year and would not be deductible under paragraph 60(j.1).
Yours truly,
for DirectorFinancial Industries DivisionRulings Directorate