26 July 1989 Administrative Letter 74046 F - Deferred Profit Sharing 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.

Subject: 24(1) Deferred Profit Sharing Plan ("DPSP")

This is in reply to your memorandum of March 28, 1989, wherein you requested our opinion in respect of the following situation:

-     24(1)

-      Subsection 147(9.1) of the Income Tax Act (the "Act") provides that for taxation years commencing after 1981, no deduction can be made in computing the income of the employer for a taxation year in respect of an amount paid by him to a DPSP in respect of a beneficiary described in paragraph 147(2)(k. of the Act.  Contributions to the DPSP appear to have ceased in accordance with subsection 147(9.1) of the Act.

-

-      24(1)

The amounts withdrawn by the company are as follows:

24(1)

24(1)

You request us to advise you of the tax consequences to the shareholders and the Company.

Pursuant to subsection 147(15) of the Act, the following rules will apply to the revoked plan

-      the revoked plan is deemed not to be a DPSP or an employee profit sharing plan as of September 30, 1984.

-      the trust is taxable on its taxable income for its 1984 and subsequent taxation year.

-      the funds withdrawn by the Company will be included in its income in the year of withdrawal.

We trust the above comments will be of assistance to you.

Yours truly,

for DirectorFinancial Industries DivisionRulings Directorate