Income Tax Interpretation Bulletin

Payments by Employer to Employee

NO: IT-196R2SR

DATE: MAY 25, 1984

SUBJECT: INCOME TAX ACT
Payments by Employer to Employee

REFERENCE: SPECIAL RELEASE

INTERPRETATION BULLETIN

Paragraph 3 should be replaced with the following:

3. On the other hand, that part of a payment in excess of the amount thereof that can reasonably be regarded as having the nature and quality of salary, wages, commissions, etc., that is compensation for something else, other than a covenant not to compete, as mentioned in 1 above, may not be taxable under section 5. However, the excess, if received in respect of a termination of employment may represent a retiring allowance under subparagraph 56(1)(a)(ii). If received in respect of employment which was terminated before November 13, 1981, it may represent a termination payment under subparagraph 56(1)(a)(viii) as it formerly read. See IT-337R2 and IT-365R for the Department's general views on the treatment of such amounts which may be received in respect of a termination of employment, including an amount received for the breach of an employment contract.