J. D. Jones (613) 957-2104
NOV 10 1988
Dear Sirs:
This is in reply to your letter of October 14, 1988, wherein you requested our opinion on the meaning of "retiring allowance" as defined in subsection 248(1) of the Income Tax Act as it relates to taxable costs and disbursements paid by way of Court Order in a wrongful dismissal case.
In our view, although all reimbursements would not be- excluded from the definition of retiring allowance as that term is defined in subsection 248(1) of the Income Tax Act, amounts provided to a taxpayer or paid on behalf-of the taxpayer to the taxpayer's solicitors as a reimbursement for costs which were essential to incur in respect of and directly relate to the conduct of an action in wrongful dismissal/breach of contract (loss of employment) are, to the extent that such costs were actually incurred by the taxpayer and are not otherwise deductible, not considered to form part of a retiring allowance. Therefore, withholding tax will not be required on the payment of such reimbursements.
As you are dealing with a completed transaction, you may wish to submit the relevant documentation to the Vancouver District Taxation Office which has the responsibility of determining the tax consequences of completed transactions and their effect on particular taxpayers.
We trust our reply will be of assistance.
Yours truly,
ORIGINAL SIGNED BY ORIGINAL SIGNÉ PAR P.D. FUOCO
for Director Small Business and General Division Specialty Rulings Directorate Legislative and Intergovernmental Affairs Branch