8 February 1995 External T.I. 9432135 - PERSONAL TRUST 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.

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:

Can an EPSP be a personal trust?

Position TAKEN:

Yes

Reasons FOR POSITION TAKEN:

An EPSP can meet the definition of personal trust pursuant to 248(1). The sole fact than an employee is beneficiary under an EPSP does not constitute consideration payable to acquire an interest in the EPSP.

		5-943213
XXXXXXXXXX	G. Martineau

Attention: XXXXXXXXXX

February 8, 1995

Dear Sirs:

This is in reply to your letter of December 6, 1995 wherein you request our opinion on whether an employee profit sharing plan ("EPSP"), as defined pursuant subsection 144(1) of the Income Tax Act ("Act"), is a personal trust under subsection 248(1) of the Act for the purposes of the definition of a qualified small business corporation share.

It appears that your enquiry relates to specific completed transactions where an identified taxpayer is involved. It is the Department's policy to examine the fiscal consequences of completed transactions through a tax audit. We offer, however, the following general comments.

A personal trust, as defined pursuant to subparagraph 248(1) of the Act, includes an inter vivos trust in which no beneficial interest was acquired for consideration payable to the trust or to any person who has made a contribution to the trust. It is a question of fact whether a particular EPSP would be a personal trust and this determination can only be made taking into account all of the circumstances. However, in our view, the sole fact that an employee is a beneficiary under an EPSP due to his employment does not constitute consideration payable to the employer to acquire a beneficial interest in the said EPSP.

As you suggested in your letter, an attachment to the T4PS slips detailing the capital gains allocated to the beneficiary and their eligibility to the capital gains deduction would be appropriate.

Yours truly,

for Director
Financial Industries Division
Rulings Directorate
Policy and Legislation Branch