12 July 1989 Ministerial Letter 74058 F - Employee Savings and Share Purchase 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.

July 12, 1989

Dear Sirs:

Re:  24(1) Employee Savings & Share Purchase Plan (the ""Plan")

This is in reply to your letter of March 27, 1989, to our Registration Division wherein you requested our opinion in respect of proposed amendments to the P;an which will be effective on July 1, 1989.

Generally, we do not give opinions in respect of proposed transactions other than a reply to an advance Income Tax ruling request.  However, in view of the time delay between the time your letter was initially received your registration Division and the present, we will offer the following general comments.

24(1)

Based upon our review of the Plan and the proposed amendments thereto, we concur with your position that the proposed Plan will not be a retirement compensation arrangement or an employee benefit plan as defined under subsection 248(1) of the Income Tax Act (the "Act").

Provided that the employer's contributions to the Plan are included in the income for the employee, under subsection 5(1) of the Act, at the time the contribution is made to the Plan, we agree with your position that the Plan would not be salary deferral arrangement under subsection 248(1) of the Act.

We also agree with your position that the employee's contributions to the proposed Plan will not be deductible in computing the employee's income.

To the extent that section 7 of the Act is to applicable to the Plan, it is our view that the employer's contributions to the Plan will be deductible in computing income under section 9 of the Act subject to the limitation under section 67 of the Act.

It is your position that sections 104 to 108 of the Act will not apply to the trust arrangement governed by the Plan.  We have not received a copy of the trust agreement and are therefore unable to comment on whether a trust exists.  However, Articles 8.4 and 8.5 of the Plan state that a designation under subsections 104(19) and 104(21) of the Act will be made in respect of any taxable dividends or net taxable capital gains realized by the trust. Consequently, it would appear that a trust does exist and that sections 104 through 108 of the Act will have application.  In particular, subsection 104(13) of the Act will determine the taxation of income payable to the employee.

Finally, provided that the 24(1) shares are purchased on the market we agree that section 7 of the Act will not apply to the proposed Plan.

The above comments are an expression of opinion only an are not binding on the Department.

Yours truly,

for DirectorFinancial Industries DivisionRulings Directorate