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.
Statement of Principal Issues
3-912920
24(1)
Background
24(1)
Principal Issues1.Will an amount be included in the executives income at the time an amount is paid to the trust, or paid by the trust to the bank, as a benefit under section 6.
2. Will the value of the security represented by the 3% charge against the line of credit be a contribution to the RCA thus requiring 50% of that value to be remitted to the Receiver General.
Positions Taken
3. In accordance with a previous position taken by section 43, no amount will be included in the executives' income at the time of the issuance of the letter of credit, where it is held by the trust, notwithstanding that the executives will be named as the beneficiaries. All the executives get at that time is some sense of security, and attempting to place a value on that security and taxing it was thought to be comparable to trying to tax an employee on the value of the security contained in an employment contract at the time he enters into it.
4. The value of the security will not represent a separate contribution to the trust. It was thought that if the security did have a value, it would be minimal and it was difficult to envisage the employer being allowed a deduction for providing that security. Other procedural problems might also occur. With this in mind and given that the only property held by the trust would be the letter of credit having a cost equal to the amount paid to the bank, which cost would reflect the value of the security, it was decided not to consider the provision of the security as a separate contribution.
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© Her Majesty the Queen in Right of Canada, 1991
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© Sa Majesté la Reine du Chef du Canada, 1991
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