Elizabeth Boyd, Jeremy J. Herbert, "Trusts Holding Shares For Employees", draft 2023 CTF Annual Conference paper

Summary Under
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Employee Benefit Plan

Use of phantom plans as EPBs (pp. 9 – 14)

  • An employee benefit plan (EBP) can be used to acquire employer or parent company shares on the open...

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Summary Under
Tax Topics - Income Tax Act - Section 144 - Subsection 144(4)

Flow-through advantage of EPSP (p. 16)

  • Unlike employee benefit plans (EBPs), EPSPs are permitted (under ss. 144(4) and (8)) to flow-out capital...

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Summary Under
Tax Topics - Income Tax Act - Section 144 - Subsection 144(7.1)

Non-taxable distribution contrasts with EBP (p. 16)

  • In the case of an EPSP used to acquire employer shares, s. 144(7.1) permits it to distribute...

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Summary Under
Tax Topics - Income Tax Act - Section 144 - Subsection 144(9)

Implications and handling of EPSP forfeited amounts (p. 17)

  • By containing specific provisions permitting an EPSP participant to deduct forfeited...

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Summary Under
Tax Topics - Income Tax Act - Section 144 - Subsection 144(3)

Use of EPSPs for open market share purchases for small amounts “out of profits” (pp. 17-18)

  • EPSPs seem to be used quite frequently to...

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Summary Under
Tax Topics - Income Tax Act - Section 7 - Subsection 7(6)

S. 7(6) requirements (pp. 20-21)

  • S. 7(6) deems a sale of securities by the s. 7(6) trust to the employee to be the same as a sale by the...

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Summary Under
Tax Topics - Income Tax Act - Section 7 - Subsection 7(2)

Use of s. 7(2) trusts predominantly by CCPC employers (p. 22)

  • S. 7(2) trusts are not common where the employer is not a CCPC, since the employee...

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Summary Under
Tax Topics - Income Tax Act - Section 8 - Subsection 8(12)

Example of s. 8(12) deduction offsetting a simultaneous s. 7 inclusion (p. 23)

  • Where a CCPC employer has its common shares to a s. 7(2) trust as...

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Summary Under
Tax Topics - Income Tax Act - Section 15 - Subsection 15(2.5)

Considerations for structuring a market maker trust (pp. 40-43)

  • Given the specified employee rules, market maker trusts are commonly used in...

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