2003 Ruling 2003-0011913 - AMENDED 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 CCRA.

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

Principal Issues:

Will the proposed amendments to an existing DSU plan result in the plan ceasing to qualify under paragraph 6801(d) of the Regulations?

Position: No

Reasons: The requirements of paragraph 6801(d) are still met.

XXXXXXXXXX 2003-001191

XXXXXXXXXX, 2003

Dear XXXXXXXXXX:

Re: Advance Income Tax Ruling Request
XXXXXXXXXX (the "Corporation") (XXXXXXXXXX)

This is in reply to your letters of XXXXXXXXXX in which you request an advance income tax ruling on behalf of the above-named taxpayer.

We understand that, to the best of your knowledge and that of the taxpayer, none of the issues involved in the ruling request is:

(i) in an earlier return of the taxpayer or a related person,

(ii) being considered by a tax services office or taxation centre in connection with a previously filed tax return of the taxpayer or a related person,

(iii) under objection by the taxpayer or a related person,

(iv) before the courts or,

(v) the subject of a ruling previously issued by the Directorate to the taxpayer or a related person, except for the advance income tax rulings noted in 4 below;

Unless otherwise stated, all references to a statute are to the Income Tax Act (Canada), R.S.C. 1985, c.1 (5th Supp.), as amended to the date of this letter, (the "Act"), and all terms and conditions used herein that are defined in the Act have the meaning given in such definition unless otherwise indicated.

Our understanding of the facts, proposed amendments to the plan and the purpose of the proposed amendments to the plan is as follows:

Facts

1. The Corporation is incorporated under the laws of Canada, a resident of Canada and a public corporation. The Corporation's common shares are listed on XXXXXXXXXX. The expression "public corporation" has the meaning assigned by subsection 89(1) of the Act.

2. The Corporation's mailing address is:

XXXXXXXXXX.

3. The Corporation files its tax returns with the XXXXXXXXXX Taxation Centre and is served by the XXXXXXXXXX Tax Services Office.

4. The Corporation has established a deferred share unit (DSU) plan entitled the XXXXXXXXXX (the "Plan") which is the subject of advance income tax rulings #970236 dated XXXXXXXXXX, 1997 and #2000-0004163 dated XXXXXXXXXX, 2000. The Plan was consolidated with the deferred share unit plan of a subsidiary corporation, which consolidation was the subject of advance income tax ruling #2002-0123153 dated XXXXXXXXXX, 2002 (the "2002 Ruling"). The subsidiary corporation's DSU plan was the subject of advance income tax rulings #971577 dated XXXXXXXXXX, 1997 and #2000-0004153 dated XXXXXXXXXX, 2000. The Plan is a prescribed plan under paragraph 6801(d) of the Income Tax Regulations (the "Regulations").

5. The Corporation currently has a board of directors composed of XXXXXXXXXX directors. The number of directors may be increased or decreased within limits set forth by the articles of incorporation of the Corporation and the Canada Business Corporations Act. Directors of the Corporation and/or directors of any subsidiary of the Corporation designated by the committee responsible for directors' compensation-related matters may be eligible to participate in the Plan ("Eligible Director").

6. Prior to XXXXXXXXXX, for each term of office, the Corporation paid its non-employee directors the following:

a. an annual retainer fee;

b. a fee for each board and committee meeting attended and reimbursements for associated traveling expenses;

c. a fee for services as a member of any standing committee of the board and an additional fee for services as chairman of any standing committee of the board; and

d. such other fees or stock based compensation as the board may have decided to pay to one or more directors from time to time.

7. Under the terms of the Plan, prior to XXXXXXXXXX, each Eligible Director of the Corporation was obliged to receive XXXXXXXXXX% of the annual retainer fee in the form of DSUs. Such Eligible Director may have, within certain time limits, elect to be paid up to XXXXXXXXXX% of other fees in the form of DSUs in lieu of being paid such other fees in cash. An Eligible Director who is a member of the board of directors of a designated subsidiary of the Corporation may, within certain time limits, elect to be paid up to XXXXXXXXXX% of the annual retainer fee and any other fee paid by the subsidiary in the form of DSUs in lieu of being paid in cash.

Proposed Amendments to the Plan

8. The Board approved certain amendments to the Plan at its XXXXXXXXXX meeting. Subject to receipt of an advance income tax ruling, the Corporation will amend the terms of the Plan with effect from XXXXXXXXXX as follows:

a) For Eligible Directors on the Board of the Corporation, the term "Annual Retainer Fee" will be replaced, in respect of post-XXXXXXXXXX services, by the term "Annual Flat Retainer Fee". The amount of the Annual Flat Retainer Fee payable to an Eligible Director of the Corporation will be determined by the position held. No other fees will be payable to Eligible Directors on the Board of the Corporation (other than reimbursement of associated travel expenses).

b) Each Eligible Director who is a member of the Board of the Corporation and who does not own XXXXXXXXXX or more common shares of the Corporation and/or DSUs shall be paid XXXXXXXXXX% of his or her Annual Flat Retainer Fee in the form of DSUs in lieu of being paid in cash.

c) Each Eligible Director who is a member of the Board of the Corporation and who owns more than XXXXXXXXXX common shares of the Corporation and/or DSUs may, within the time limits provided by the Corporation, elect to be paid up to XXXXXXXXXX% of such Annual Flat Retainer Fee in the form of DSUs in lieu of being paid in cash.

Purpose of the Proposed Amendments to the Plan

9. The proposed amendments to the Plan will enhance the Corporation's ability to attract and retain high quality individuals to serve as members of the Board of Directors of the Corporation and reflect the increased roles and responsibilities of the Directors.

Ruling Given

Provided that the preceding statements constitute a complete and accurate disclosure of all of the relevant facts, proposed amendments to the Plan and purpose of the proposed amendments to the Plan, and provided that the proposed amendments to the Plan are as described above, we rule as follows:

A. Provided the amendments described in the 2002 Ruling were implemented prior to the deadline set out therein, the rulings issued in the 2002 Ruling will continue to be binding on the CCRA in accordance with the practice outlined in Information Circular 70-6R5 dated May 17, 2002.

The above advance income tax ruling, which is based on the Act and Regulations in their present form and does not take into account any proposed amendments thereto, is given subject to the general limitations and qualifications set out in Information Circular 70-6R5 Advance Income Tax Rulings, dated May 17, 2002, and is binding on the CCRA provided that the proposed amendments to the Plan are implemented by XXXXXXXXXX.

Yours truly,

XXXXXXXXXX
for Director
Financial Industries Division
Income Tax Rulings Directorate
Policy and Legislation Branch