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: 1. whether rules in IT-85R2 will apply where no actuarial info, but the only money that will be transferred to the trust is money that will be payable in the trust in the same year to employees
2. whether H&W trust rules apply where 2-tiered trust
Position: 1.yes
2. issue withdrawn
Reasons: 1. pay-as-you go plans acceptable
2. no clear business necessity for an additional trust
XXXXXXXXXX 2001-010548
Denise Dalphy, LL.B.
(613) 941-1722
May 15, 2002
Re: Request for Technical Interpretation
We are writing in reply to your letters dated September 5, 2001 and March 27, 2002 concerning proposed arrangements for a trust to fund certain employee benefits.
The particular circumstances in your letter appear to describe an actual situation that will involve specific taxpayers. As explained in Information Circular 70-6R4, it is not this Directorate's practice to comment on proposed transactions involving specific taxpayers other than in the form of an advance income tax ruling. However, as discussed in our (XXXXXXXXXX/Dalphy) telephone conversation of May 7, 2002, we will provide the following general comments.
You have asked whether a health and welfare trust that would otherwise meet the criteria described in Interpretation Bulletin IT-85R2, Health and Welfare Trusts for Employees ("IT-85R2"), would still be considered a health and welfare trust as described therein in a situation where no actuarial estimates are used, but the employer cannot pay more funds to the trust in a particular year than are payable in that year by the trust for benefits (a "pay-as-you-go" trust).
In our view, the fact that a trust is a "pay-as-you-go" trust will not, in and of itself, preclude the application of the income tax consequences described in IT-85R2.
The foregoing comments represent our general views with respect to the subject matter. As indicated in paragraph 22 of Information Circular 70-6R4, the above comments do not constitute an income tax ruling and accordingly are not binding on the Canada Customs and Revenue Agency. Our practice is to make this specific disclaimer in all instances in which we provide an opinion.
Yours truly,
Steve Tevlin
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
.../cont'd
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