Principal Issues: 1. Does the paragraph (k) exception in the SDA definition apply to a hypothetical RSU plan? 2. Will paragraph 7(3)(b) apply to deny a deduction if the USCo parent corporation of the CanCo employer has discretion as to whether an RSU will be settled in the form of one USCo share or an equivalent-value cash payment? 3. Will Part XIII tax apply to reimbursements made under an agreement between CanCo and USCo to make USCo whole for payments of RSUs in cash or USCo shares made to CanCo employees under the Plan?
Position: 1. Likely not. 2. No. 3. No.
Reasons: 1. We generally assume that an award is attributable to past service if employees receive something of value on the grant date. In this case because the grant is made early in the year, the service year likely preceded the grant year. The paragraph (k) exception to the SDA definition would not apply since the settlement date is more than three years after the end of the apparent service year. 2. There is no agreement to sell or issue shares to an employee for purposes of subsection 7(1) since USCo has discretion to settle an RSU in cash. 3. A reimbursement payment would be made pursuant to a legal agreement in return for equivalent consideration paid by USCo to CanCo's employees and would not therefore be a benefit for purposes of subsections 15(1) and 246(1) and Part XIII.
