25 November 1992 External T.I. 9228830 F - Employee 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.

1992 Canadian Tax Foundation Conference

Employee Profit Sharing Plans

Question 47

The recent decision of the Federal Court of Appeal in Placer Dome Inc. has caused uncertainty as to its potential application to certain plans which have been recognized by Revenue Canada as Employees' Profit Sharing Plans, the tax treatment of which is specified by section 144. In particular, amounts paid by an employer to the plan's trustee who uses some or all of such contributions to purchase treasury shares from the employer might, by virtue of the court decision, be disallowed by subsection 7(3) thereby overriding subsection 144(5).

Is it Revenue Canada's intention to change its assessing practises in respect of plans which it has agreed in the past are subject to the provisions of section 144?

Answer 47

We are not aware of any statements or positions taken by the Department in the past with respect to the acquisition by an Employees' Profit Sharing Plan of treasury shares of the employer.

As a result of the recent decision of the Federal Court of Appeal in Placer Dome Inc. and its application to section 7 of the Income Tax Act, the Department proposes to undertake a complete review of our practises where treasury shares of the employer are acquired by employees or by employee stock purchase plans such as employee benefit plans, employee profit sharing plans, deferred profit sharing plans, etc.