Principal Issues: (i) Where the sole shareholder of a corporation is also an employee, would the corporation's payment of premiums for a PHSP represent a shareholder benefit under subsection 15(1)? (ii) What are the potential tax implications if the shareholder's spouse is an employee and also a member of the plan? (iii) If the benefits under the PHSP to a part time employee are based on the proportional rate of pay of that employee, what impact would that have on the determination as to whether the employee-shareholder's benefit under the PHSP is received in his or her capacity as an employee or shareholder.
Position: (i)&(ii) Questions of Fact, (iii) Yes
Reasons: (i)&(ii) Whether 15(1) or 56(2) applies depends if the benefits are conferred by virtue of shareholdings. (iii) It would generally be reasonable to compare the level of benefits provided under the PHSP to an employee-shareholder to the benefits provided to a part time employee, which are based on the rate of pay of the part time employee.
XXXXXXXXXX Rob Ferrari
January 24, 2006