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.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues:
Whether deferred salary leave plan meets conditions of Regulation 6801(a).
Position TAKEN:
No, changes to plan required.
Reasons FOR POSITION TAKEN:
Routine
XXXXXXXXXX 940800
Attention: XXXXXXXXXX
April 14, 1994
Re: Deferred Salary Leave Plan (the "Plan")
This is in reply to your letter of March 10, 1994, in which you ask us to review the above-noted Plan and confirm that it complies with the Income Tax Act. We have the following comments.
Subparagraph 6801(a)(i) of the Income Tax Regulations (the "Regulations") requires that the leave of absence commence immediately after the deferral period. The Plan does not address this specifically.
Subparagraph 6801(a)(iii) of the Regulations states that during the leave of absence the employee may not receive salary or wages (other than the deferred amount and reasonable fringe benefits) from the employer or from a person or partnership with whom the employer does not deal at arm's length. XXXXXXXXXX in your Plan should be amended accordingly.
Lastly, employees participating in a deferred salary leave plan should not be permitted to withdraw at will. (XXXXXXXXXX) Termination of employment is sufficient cause, but withdrawal for financial reasons or other hardship should be made subject to the obtaining of the employer's consent.
Written confirmation of the tax implications inherent in proposed transactions are only given by this Directorate in the form of an advance income tax ruling in accordance with the guidelines described in Information Circular 70-6R2. The foregoing comments are an expression of opinion only and are not binding on the Department.
Yours truly,
for Director
Financial Industries Division
Rulings Directorate
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