Members of a religious order that is a registered charity (the “Community”) have taken vows of perpetual poverty and turn over all their income to the Community and retain property only in a few items of a personal nature. However, if a member wishes to leave the Community and return to secular society, the Community makes a gift to him of a lump-sum departure amount that is intended as assistance to compensate for the lack of financial resources of the departing member as a result of him having taken a vow of perpetual poverty while at the Community and to enable the Member to meet basic needs in light of his age and income-earning potential (if any). The departure amount is determined as: a basic amount plus an additional amount for each year spent in the Community; and an amount for each year the Member did not contribute to a pension or retirement plan, if applicable, except for study or healing years.
In addition to the departure amount he also is paid the tax refund generated from his most recent return.
Rulings that those two amounts are not to be included in computing his income, and are not subject to withholding or reporting as income. The CRA summary states that the “amount is considered to be a donation.”