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| P. Spice | |
| (613) 957-8953 |
24(1)
Attention: 19(1)
January 20, 1992
Dear Sirs:
Re: Technical Interpretation of Paragraph 60(j.1) of the Income Tax Act
We are writing in reply to your letter of October 25, 1991, in which you ask for our opinion concerning the application of the above-noted provision to a particular fact situation.
Your enquiry appears to relate to specific taxpayers involved in specific transactions, either completed or proposed. As indicated in paragraph 21 of Information Circular 70-6R2, written confirmation of the tax implications inherent in particular transactions are given by this Directorate only where the transactions are proposed and are the subject matter of an advance ruling request submitted in the manner set out in that Circular. Where the particular transactions are completed, the enquiry should be addressed to the relevant District Taxation Office. The following comments are therefore of a general nature only. Reference is made to your numbered questions.
1. For the purposes of subparagraph 60(j.1)(iv) of the Income Tax Act the "Act"), it is a question of fact whether or not the employer paying the retiring allowance has acquired or continued the business of a former employer. Nevertheless, where a manufacturer enters into a distribution agreement with a company, it is our view that the company is not continuing the business of the former distributor.
2. It is our position that an employee will be considered to have retired even though he may continue as a director at nominal compensation (see paragraph 4(a) of Interpretation Bulletin IT-337R2 ("Retiring Allowances") and paragraph 4 of ATR-12 ("Retiring Allowances", October 27, 1986).
3. We decline to express an opinion on whether a retiring allowance is a reasonable amount except in the context of an advance ruling.
Yours truly,
for DirectorFinancial Industries DivisionRulings Directorate