10 June 1994 External T.I. 9412085 - TAXATION OF AMOUNTS OUT OF BONUS PLAN

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 Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues:

Whether absence of regular annual payments under bonus plan affects taxation.

Position TAKEN:

No.

Reasons FOR POSITION TAKEN:

Where there are sufficient profits to result in bonus to employee, taxation for year of receipt; if not sufficient profits and no payment, no tax consequences. (This is not a section 144 EPSP trust but rather a plan providing for bonuses based on performance.)

XXXXXXXXXX 941208

Attention: XXXXXXXXXX

June 10, 1994

Dear Sirs:

Re: Gain Sharing Plan

This is in reply to your letter received May 6, 1994, in which you ask whether our previous comments to you in our letter of December 3, 1993, (file 933380) would change if payments under the above-noted plan were not made every year. You explain that depending on the quarterly results, payments may not be made to the employees for several years, or may be made one year and not the next.

The fact that the level of the company's gains may not be sufficient to trigger payment of a bonus to the employees for a particular fiscal period does not affect our previous answer. When and if bonuses are paid under the Plan, the payments are income from employment and taxable in the year of receipt.

We trust the foregoing comments, although not binding on the Department, are of assistance.

Yours truly,

for Director
Financial Industries Division
Rulings Directorate