Income Tax Severed Letters - 2005-08-12

Ruling

2005 Ruling 2004-0096311R3 - Deferred Share Units - Bonus Plan

Unedited CRA Tags
248(1) 5(1)

Principal Issues: Whether a plan that provides for the payment of a bonus based on the value of restricted stock units credited to a participant is excluded from the SDA definition by virtue of the exception in (k) of that definition?

Position: Yes

Reasons: The terms of the plan meet the conditions in the subsection (k) exception found in the SDA definition. The plan was modified to ensure the granting of the units was at the discretion of the CEO or the Chair of the Board to ensure the grant was a bonus and not regular remuneration.

2005 Ruling 2005-0113301R3 - Butterfly

Unedited CRA Tags
55(3)(b)

Principal Issues: Whether the proposed transactions meet the exemption under paragraph 55(3)(b)?

Position: Yes.

Reasons: Meets the requirements of the legislation.

2005 Ruling 2005-0126621R3 - RRIF - Claim against the estate

Unedited CRA Tags
146.3(1) 146.3(6.2)

Principal Issues: Whether an amount paid to the surviving spouse, pursuant to a claim against the estate, as a dependant spouse who has not been adequately provided for under the deceased's will, is a designated benefit as defined in subsection 146.3(1) of the Act?

Position: Question of fact. If the amount received by the surviving spouse out of the deceased's RRIF is transferred pursuant to a court order issued pursuant to a law of a province providing for the relief or support of dependants, it is the CRA's view that the amount will be a designated benefit as defined in subsection 146.3(1) of the Act.

Reasons: The amount is considered to be paid as a consequence of the annuitant's death.

Ministerial Correspondence

29 July 2005 Ministerial Correspondence 2005-0137971M4 - employee stock purchase plans

Unedited CRA Tags
7

Principal Issues: Taxation of employment benefits derived from the exercise of employee stock options.

Position: The letter provides a brief explanation of the existing legislation.

Reasons: CRA must apply the law as written. The Department of Finance is responsible for the implementation and amendment of tax policy. Both CRA and the Department of Finance are aware of the issues raised by the correspondent.

Technical Interpretation - External

3 August 2005 External T.I. 2005-0139921E5 - Retiring allowance and legal fees

Unedited CRA Tags
248(1) 56(1) 56(l.1)

Principal Issues: Are legal fees paid directly to a lawyer by a former employer included in the former employee's income?

Position: In general they are but this may not always be the case.

Reasons: The agreement to pay the fees is usually between the employer and the employee and the payment to the lawyer is made at the direction of the employee. It would be unusual, but possible that a separate agreement is entered into between the employer and the lawyer.

Technical Interpretation - Internal

5 August 2005 Internal T.I. 2005-0131461I7 - definition of "restricted financial institution"

Unedited CRA Tags
248(1) "restricted financial institution" (e)

Principal Issues: meaning of "such persons" in paragraph (e) of definition of "restricted financial institution" in subsection 248(1)

Position: persons with whom the corporation is dealing at arm's length

Reasons: wording of ITA / basic grammar