Ms. Meg had been working for the same employer for the past 10 years and was tired of her job. She decided to quit and travel to Australia for a year. On leaving, her employer paid her a lump-sum amount of $10,000, since Ms. Meg had been a good employee of theirs and they were hoping she might come back to work for them when she returned to Canada. Ms. Meg had no intention of working for them again but was grateful for the payment. How will this payment be taxed in Ms. Meg’s hands?

a) Since Ms. Meg has quit and moved to Australia, this payment will not be taxed

b) Since Ms. Meg has no intention of working for them again, she does not have to pay taxes on this payment

c) This payment qualifies as a retiring allowance and should be included in Ms. Meg’s income for tax purposes

d) This payment does not qualify as a retiring allowance, however, it will be included in Ms. Meg’s income for tax purposes

Answer rating: 100% (QA)

Option cThis payment qualifies as a retiring allowance and should be include... View the full answer