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:
1. Can a SAR become an SDA if an employee can elect to exercise his right at any time over a period.
2. If it is an SDA will 248(1)"SDA"(k) apply
Position TAKEN:1. Yes.
2. No.
Reasons FOR POSITION:
both answers are established positions from prior opinions and/or ATR.
XXXXXXXXXX 5-942283
Attention: XXXXXXXXXX
September 14, 1994
Dear Sirs:
Re: Stock Appreciation Rights ("SARs") and Salary Deferral Arrangements ("SDAs")
This is in reply to your letter of August 18, 1994 concerning the treatment of SARs as SDAs.
We confirm that the Department's reply to Question 26 of the 1988 Revenue Canada Roundtable still reflects the Department's position on SARs. Nevertheless, we also confirm that the SDA rules could apply to a SAR if a beneficiary under a SAR arrangement chooses to defer receipt of an amount payable under the plan in a year. As expressed in the editors notes to Advance Income Tax Ruling ATR-45, if an employee creates a right to receive an amount after a year in accordance with the terms of a SAR, the amount could be a deferred amount under an SDA if the purpose for the creation of the right was to postpone tax otherwise payable.
With respect to the application of paragraph (k) of the definition of an SDA in subsection 248(1) of the Income Tax Act, it is the Department's position that the exception only applies when a plan would otherwise be an SDA and the bonus was payable from the date of inception of the arrangement.
Yours truly,
for Director
Financial Industries Division
Rulings Directorate
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