7 September 1990 External T.I. 901585 F - Deferred Salary 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.

September 7, 1990

Dear Sirs:

This is in reply to your letter of July 6, 1990 in requesting our opinion with respect to the proper treatment for tax purposes of certain proposed payments.

Since the subject matter of your request relates to a number of completed transactions we are unable to respond, except by general comment as provided below.  For specific consideration of your situation, it should be referred to your local District Taxation Office together with all relevant details including an identification of the employee involved.

In general, any payments made out of a Deferred Salary Leave Plan to an employee must be reported as taxable income for the year in which the payment is made.  When an employee instead directs the payment to be held for his benefit to be paid at some future date, we are of the opinion that at that time the amount becomes a "deferred amount" under a Salary Deferral Arrangement (an "SDA") and is taxable to the employee in the year the deferral was made (i.e. the year it is transferred to the account).  It must be noted at under the SDA rules any interest or other income earned on such an account must also be reported as employment income on an annual basis as it is earned.

We trust these comments will be of assistance to you.

Yours truly,

for DirectorFinancial Industries DivisionRulings Directorate