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.
August 30, 1995
Penticton Tax Services Headquarters
Blair Sixsmith A. Humenuk
Assistant Director of 957-8953
Verification and Enforcement
951715
XXXXXXXXXX
Health and Welfare Trust
As indicated in the attached correspondence, the above noted corporation currently has a private health services plan for its employees which is administered through a trust.
As indicated to XXXXXXXXXX in our conversation of August 28, 1995, an audit of the trust would be required in order to determine whether the trust was being operated in accordance with its trust agreement and in accordance with the guidelines set out in Interpretation Bulletin IT-85R2 for health and welfare trusts.
While we have not reviewed the trust documentation, we understand that the principal shareholder of the corporation is the sole trustee of the trust. As indicated to XXXXXXXXXX the monthly contribution by the employer to the trust will not necessarily be considered an operating expense of the employer corporation if the contribution is not required to be made. In our view the lack of independence of the trustee from the employer could lead to a finding that the employer's contributions to the trust were not required and therefore not deductible. In the health and welfare trust arrangements which we have reviewed, there is typically equal representation from the employer or employer's group and the employees or their union. XXXXXXXXXX indicated that the above noted corporation would consider making a change in the trustee representation in order that the trust qualify for the treatment set out in IT-85R2.
While XXXXXXXXXX advised us that her questions concerning the operation of a health and welfare trust have been answered, we enclose a copy of the correspondence and a record of our conversation with her for your files.
P.D. Fuoco
Section Chief
Personal and General Section
Business and General Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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© Her Majesty the Queen in Right of Canada, 1995
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