CRA indicates that the transfer of DSU rights to a corporation would cause the plan to cease to qualify, perhaps retroactively

CRA indicated that the rights of an employee under a deferred share unit plan described in Reg. 6801(d) (a "DSU Plan") were not capital property given that an “employee's rights under a DSU Plan generate income from an office or employment” and thus could not be transferred on an s. 85(1) rollover basis to a personal holding company.

In finding that the plan would not qualify for the para. (l) exclusion from the salary deferral arrangement definition after such a transfer, so that the FMV of the DSUs would be included in computing the employee's income in the year of the transfer (to the extent that such value had not already been included), CRA stated:

A transfer to another person would contravene the preamble to paragraph 6801(d), which requires that the agreement be between the corporation and the employee and that it be that employee who may receive amounts under the arrangement. Furthermore … the transfer of the employee's rights in the DSU Plan could indirectly allow the individual to access the value of the individual's rights before one of the times specifically identified in paragraph 6801(d)(i) … which would also contravene the requirements of paragraph 6801(d).

However:

[T]he presence of a transfer that would be at the discretion of the employee and the employer could demonstrate that the parties never intended to meet the criteria required for the plan to qualify as a DSU plan. In such circumstances, the agreement or arrangement would qualify as an SDA from the time of its creation, resulting in the retroactive application of the SDA rules.

Neal Armstrong. Summaries of 3 November 2023 APFF Financial Strategies Roundtable, Q.6 under s. 248(1) – SDA and s. 85(1.1).