23 November 1993 Internal T.I. 9331807 F - Sick Leave Benefits Out of Pension 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.

SCARBOROUGH DISTRICT OFFICE HEAD OFFICE G.J. Baronette, Financial Industries Director Division

Attention:  J. Danford (613) 957-8953 BEIA - 451-1-5 933180

XXXXXXXXXX

Letter of September 13, 1993

This is in reply to your round trip memorandum of October 27, 1993, in which you asked us to review the above-noted letter and respond to the client's enquiry . Since the enquiry relates to an actual fact situation we cannot reply directly, but can provide the following comments to assist you. We have advised XXXXXXXXXX that your office will be in contact with her and will request the identities of the employer and employees involved.

We confirmed with the Registered Plans Division that the amounts paid into the XXXXXXXXXX pension plan represent deferred compensation and are not considered employee contributions to the plan. Therefore, the amounts when paid to the employer (XXXXXXXXXX) are considered a benefit to the employer under a pension plan pursuant to paragraph 56(1)(a) of the Income Tax Act (the "Act"); when paid to the employees in the following described situations by the employer they are taxable as noted below:

1.     Payments to Estate of Deceased Employee

(a)     Employee Died Before Retiring - taxable as a "death benefit" pursuant to subparagraph 56(1)(a)(iii) of the Act. For Department's position on this matter see paragraph 2(b) of Interpretation Bulletin IT-301;

(b)     Employee Died After Retiring - taxable as a "retiring allowance" pursuant to subparagraph 56(1)(a)(ii) of the Act. See paragraph 9 of Interpretation Bulletin IT-337R2.

2.     Payments to Employees Who Have Retired - taxable as a "retiring allowance" as in (b) above. See paragraph 5 of Interpretation Bulletin IT-337R2.

There will be no immediate tax consequences to employees whose sick leave is reinstated by the employer to compensate for the original amounts foregone in 1977-78.

Enclosed are the original letter and the Routing Slip dated October 13, 1993 from the Winnipeg Taxation Centre.

for DirectorFinancial Industries DivisionRulings Directoratec.c.      Kevin Smith - Registered Plans