Principal Issues: 1. Whether the proposed conversion of SAR units to DSUs and the adding of dividend equivalents result in an immediate income inclusion. 2. Whether the GAAR should be used to challenge the tax benefits obtained through a fully-leveraged EPSP structure.
Position: 1. Yes. 2. Recommend that matter be referred to the GAAR Committee.
Reasons: 1. The proposed changes represent a fundamental change to the units and therefore a disposition of the participants rights under the plan. 2. The proposed structure is highly artificial, provides significant tax deferral and rate reduction benefits on employment compensation and represents an abuse of the EPSP rules.