Tom retired from X Corp. on June 30th of the current year after turning 65 in December of last year. He plans to travel with his wife who is 45 years of age. On retirement, Tom received a retiring allowance of $40,000 for his years of loyal service. Tom started his employment with X Corp. in 1990.
Determine the income tax consequences of the retiring allowance for Tom. Income tax reference: ITA 56(1)(a), 60(j.1).