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.
Principal Issues: Whether positions adopted in 2009-0320311I7 and 2009-0323391R3 remain valid in light of the amendment to subparagraph (b)(i) of the advantage definition that replaced the language "open market" with "normal commercial or investment context".
Reasons: The amendment was simply clarifying in nature and did not alter the fundamental scope of the provision.
May 28, 2015
Re: Advantage tax and employee-owned securities
This is in reply to your email of March 7, 2015 in which you ask whether employees may hold securities of their employer in their registered retirement savings plan (RRSP) or tax-free savings account (TFSA), without the holding of such securities being considered an "advantage" pursuant to subparagraph (b)(i) of the definition "advantage" in subsection 207.01(1) of the Income Tax Act (the "Act"). In particular, you ask whether the views we expressed in 2009-0320311I7 and 2009-0323391R3 have changed in light of the amendment to that subparagraph that replaced the language "open market" with "normal commercial or investment context".
This technical interpretation provides general comments about the provisions of the Act and related legislation (where referenced). It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination. The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R6, Advance Income Tax Rulings and Technical Interpretations.
We can confirm it remains our position that the transactions that were the subject of the above-referenced files (also discussed in Income Tax Technical News No. 44 under the heading Key Employee Tax-Free Savings Account) would give rise to an advantage under the amended language. Whether this provision, or the complementary provision in subparagraph (b)(ii), would apply in other situations where employees hold securities of their employer is a question of fact that would require a review of all of the circumstances.
In our view the amendment was simply clarifying in nature and did not alter the fundamental scope of the provision. This is consistent with the June 6, 2012 comfort letter from the Department of Finance in which the amendment was first proposed. In particular, this letter confirmed that the amendment was not intended to accommodate estate freeze transactions.
We trust our comments will be of assistance.
Mary Pat Baldwin, CPA, CA
Financial Industries and Trusts Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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