2003 Income Tax Severed Letter 2003-0030761 - CONVERSION ELECITON IN PSU 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 a phantom stock unit plan continue to be a prescribed plan or arrangement pursuant to paragraph 6801(d) of the Regulations, where the plan is amended to revise the timing of a participant's elections to convert PSUs to coincide with a revised PSU vesting schedule?

Position: Yes.

Reasons:

The amendment to the plan does not offend the requirements of paragraph 6801(d).

XXXXXXXXXX 		2003-003076

XXXXXXXXXX, 2003

Dear XXXXXXXXXX:

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

This is in reply to your letter of XXXXXXXXXX and is supplemental to our advance income tax ruling number 2002-016910 dated XXXXXXXXXX, 2003 as amended by our supplementary advance income tax ruling number 2003-002568 dated XXXXXXXXXX, 2003 (collectively, the "Ruling"). If the definition of a capitalized term is not reflected in this letter, the capitalized term has the meaning as assigned in the Ruling.

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

(a) in an earlier return of the Corporation or a related person;

(b) being considered by a tax services office or tax centre in connection with a previously filed tax return of the Corporation or a related person;

(c) under objection by the Corporation or a related person;

(d) before the courts; nor

(e) the subject of a ruling previously issued to the Corporation or a related person by the Income Tax Rulings Directorate, other than in the Ruling.

Our understanding of the facts, proposed transaction and purpose of the proposed transaction is as follows:

Facts

1. The Corporation files its tax returns at the XXXXXXXXXX Tax Services Office and deals with that office. The head office of the Corporation is XXXXXXXXXX.

2. The Corporation obtained the Ruling regarding a proposed deferred compensation plan (the "Plan").

3. The second and third sentences of 14. of the Ruling states:

"At the next date when the Participant could make an election as to how the deferred amounts in his or her account are to be allocated following the XXXXXXXXXX anniversary of the date on which the particular Mandatory Deferral Amount was allocated to the PSUs that track the Corporation's common shares, the Participant may convert XXXXXXXXXX% of those PSUs to other PSUs, the value of which is based on the value of Subco's Special Shares. In the following year and thereafter the Participant may convert the remaining PSUs that base their value on the Corporation's common shares to PSUs, the value of which is based on the value of Subco's Special Shares."

4. The Corporation has not yet implemented the Plan.

Proposed Transaction

5. The terms of the proposed Plan will be amended to provide that Participants will be able to elect to convert vested PSUs that correspond to the common shares of the Corporation to other PSUs at the next election date after the PSUs have vested.

6. The second and third sentences of 14. of the Ruling are amended to state:

"At the next date when the Participant could make an election as to how the deferred amounts in his or her account are to be allocated, the Participant may convert any vested PSUs that track the Corporation's common shares to other PSUs, the value of which is based on the value of Subco's Special Shares."

7. The proposed Plan, as amended, will be implemented.

Purpose of the Proposed Transaction

The purpose of the proposed transaction is to simplify the allocation procedure under the proposed Plan by granting Participants the right to reallocate PSUs as soon as they have vested.

Ruling Given

Provided that the preceding statements constitute a complete and accurate disclosure of all of the relevant facts, proposed transaction and purpose of the proposed transaction, we rule as follows:

A. The above proposed transaction will not, in and of itself, cause the rulings given in the Ruling to cease to be binding on the Canada Customs and Revenue Agency, in accordance with the practice outlined in Information Circular 70-6R5 dated May 17, 2002, provided that the proposed Plan, as amended, is implemented by XXXXXXXXXX.

Yours truly,

XXXXXXXXXX
for Director
Financial Industries Division
Income Tax Rulings Directorate