16 November 1989 Administrative Letter 58936 F - Deferred Compensation Leave 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.

November 16, 1989

Dear Sirs:

Re:  Section 6801 of the Income Tax Regulations (the "Regulations")

This is in reply to your letter of October 6, 1989 wherein you request our opinion as to whether the Deferred Compensation Leave Plan (the "Plan") attached to your letter would meet the requirements of a prescribed plan under section 6801 of the Regulations.

We do not give opinions in respect of proposed transactions other than as a reply to an advance income tax ruling request.  However, we may offer the following general comments.

1.     The percentage mentioned in subparagraph 6801 (a)(ii) of the Regulations is to be applied to gross earnings (salary or wages).

2.     Subparagraph 6801 (a)(iv) of the Regulations requires the income of the plan to be paid annually to the employee.  Since the Regulations are very specific on this subject, 24(1)

3.     It is our opinion that the provisions of subparagraph 6801(a)(iii) of the Regulations would not be contravened where the inclusion of an interest element in instalment payments is make to a participant of a plan during his leave of absence 24(1)

4.     24(1) The Plan must not permit voluntary withdrawals since this may indicate that one of the main purposes of the Plan is to defer taxes rather than permit employees to fund a leave of absence.

5.     Subparagraph 6801(a)(iv) of the Regulations provides for the annual payout of income and subparagraph 6801(a)(vi) of the Regulations provides that all amounts held for the employee's benefit has to be paid no later than the end of the first taxation year that commences after the end of the six year deferral period. 24(1)

You are advised that this letter is not an advance income tax ruling but is merely a statement of opinion on the specifics of your proposed Plan and it is not binding upon the Department. 

Should you desire an advance income tax ruling, the request should be made following the procedures outlined in Information Circular IC-70-6R.

We trust the above comments will be of assistance to you

Yours truly,

for Director Financial Industries Division Rulings Directorate