Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CCRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.
Principal Issues: Can a member of a self-funded leave plan work for his or her employer during the period of leave with no income tax consequence?
Position: Yes.
Reasons: The plan is not a 6801(a) plan. The period of leave is funded with tax-paid dollars. No salary was deferred.
XXXXXXXXXX 2001-010520
G. Kauppinen
October 29, 2001
Dear XXXXXXXXXX:
Re: Self-funded Leave Plan
This is in reply to your facsimile of October 10, 2001 regarding self-funded leave plans.
Specifically, you ask whether a teacher could work for your school Board during the year in which they are on a leave of absence without pay. During the year of leave, the teachers are living on amounts they have saved from their salary in a number of prior years. That is, the teachers have been taxed on their full salary in the years prior to the year of the leave. No salary has been deferred within the meaning of paragraph 6801(a) of the Income Tax Regulations ("the Regulations").
Opinions concerning proposed transactions involving specific taxpayers will only be provided in response to a request for an advance income tax ruling. For more information concerning advance tax rulings, please refer to Information Circular 70-6R4 dated January 29, 2001, issued by the Canada Customs and Revenue Agency. Copies of information circulars and interpretation bulletins are available from your local tax services office or on the Internet at the following site - http://www.ccra-adrc.gc.ca/formspubs/menu-e.html. However, we can provide you with the following general comments.
Subparagraph 6801(a)(iii) of the Regulations says that throughout the period of leave an employee who is a member of a plan which is subject to paragraph 6801(a) of Regulations cannot receive salary or wages from their employer during the period of the leave of absence. Because the teachers are funding their leave out of tax-paid dollars, they are not subject to the provisions of paragraph 6801(a) of the Regulations. Accordingly, the restrictions in subparagraph 6801(a)(iii) of the Regulations do not apply to these employees. Consequently, they are not precluded from working for the Board during their leave of leave.
We trust our comments will be of assistance to you.
Yours truly,
Roberta Albert, CA
for Director
Financial Industries Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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