8 August 1990 Income Tax Severed Letter ACC9340 - Transfer of Retiring Allowances

24(1)
                                  901077
                                  M. Shea-DesRosiers
                                  (613) 957-8953

Attention: 19(1)

August 8, 1990

Dear Sirs:

Re: Subparagraph 60(j.1)(iv) of the Income Tax Act (the "Act")

This is in reply to your letter of June 1, 1990 requesting our interpretation of subparagraph 60(j.1)(iv) of the Act in respect of the following hypothetical situation.

A taxpayer purchases all assets of a business and subsequent to the acquisition, the employees of the original employer are transferred to a sister corporation (present employer) which is 100% owned by the acquirer.

The present employer intends to pay retiring allowances to the individual in question. The amount of the retiring allowance to be paid to the employees is calculated with reference to the employees' period of employment with the former employer as well as with the present employer.

With respect to the above situation, you wish to know whether the employees' employment with the former employer would be included in the calculation of the "number of years" for the purposes of subparagraph 60(j.1)(ii) of the Act.

Since the current employer has continued the business of the former employer and for the purposes of paragraph 60(j.1) of the Act is a person "related to the employer", we are of the opinion that an employee's service with the former employer would be included in the calculation of the "number of years" for the purposes of subparagraph 60(j.1)(ii) of the Act.

The above comments are an expression of opinion only. They do not form an advance income tax ruling and are not binding on the Department. We trust, however, that they will be of assistance to you.

Yours truly,

for Director Financial Industries Division Rulings Directorate