5 June 2003 Internal T.I. 2003-0017957 - PREDECESSOR EMPLOYER FOR RPP PURPOSES

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:

Does a particular corporation satisfy the definition of "predecessor employer" in subsection 8500(1) of the Regulations?

Position:

This is a question of fact, but from the information provided, it appears that the corporation does qualify as a predecessor employer.

Reasons: Wording of the definition.

				June 5, 2003

	Registered Plans Directorate		Income Tax Rulings
	Annelisa Gillespie			  Directorate
	Director			Renée Shields
				948-5273

2003-001795

Predecessor Employer

This is in response to a letter received by the Income Tax Rulings Directorate ("Rulings") from XXXXXXXXXX (the "Consultant") by facsimile on May 9, 2003. At the request of the Registered Plans Directorate ("RPD"), the Consultant asked that we confirm whether XXXXXXXXXX (the "Company") qualifies as a "predecessor employer" pursuant to subsection 8500(1) of the Income Tax Regulations (the "Regulations"). A copy of the Consultant's letter is enclosed for your reference.

Because the inquiry relates to a specific fact situation and deals with a completed transaction, we would be unable to provide any concrete information to the Consultant. Accordingly, it is more appropriate that Rulings reply to RPD. The Consultant has agreed to this manner of response.

As we understand the facts, the Company participated in a registered pension plan ("RPP"). The Company's assets, net of its liabilities, were sold to XXXXXXXXXX ("NextCo"). Employees of the Company became employees of NextCo. NextCo has established its own RPP under which it is the participating employer. The NextCo RPP wishes to recognize employee service with the Company. We note that the sale of NextCo shares to XXXXXXXXXX is not relevant to the issue of whether the Company is a predecessor employer to NextCo.

The definition of "predecessor employer" in subsection 8500(1) of the Regulations reads as follows:

"predecessor employer" means, in relation to a particular employer, an employer (in this definition referred to as the "vendor") who has sold, assigned or otherwise disposed of all or part of the vendor's business or undertaking or all or part of the assets of the vendor's business or undertaking to the particular employer or to another employer who, at any time after the sale, assignment or other disposition, becomes a predecessor employer in relation to the particular employer, where one or more employees of the vendor have, in conjunction with the sale, assignment or disposition, become employees of the employer acquiring the business, undertaking or assets."

Since NextCo acquired all of the assets and liabilities of the Company and employees of the Company became employees of NextCo, the facts provided would indicate that the Company is a predecessor employer to NextCo.

We trust that these comments will be of assistance.

For your information a copy of this memorandum will be severed using the Access to Information Act criteria and placed in the Canada Customs and Revenue Agency's electronic library. A severed copy will also be distributed to the commercial tax publishers for inclusion in their databases. The severing process will remove all material that is not subject to disclosure, including information that could disclose the identity of the taxpayer. Should your client request a copy of this memorandum, they can be provided with the electronic library version, or they may request a severed copy using the Privacy Act criteria, which does not remove client identity. You should make requests for this latter version to Mrs. Jackie Page at (819) 994-2898. A copy will be sent to you for delivery to the client.

Mickey Sarazin, C.A.

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