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:
An article published in the "Taxation of Executive Compensation and Retirement" concerning letters of credit to secure post-employment obligations mentions that our position stated in October 1995 at the APFF conference is a departure from a previous position stated at the 1992 CTF conference and a return to a position stated at the 1988 CTF conference.
Position:
Recent position not inconsistent with position stated in 1992.
Reasons:
Facts situations in 1995 and 1992 can be distinguished.
5-960042
XXXXXXXXXX A. St-Amour
Attention: XXXXXXXXXX
January 29, 1996
Dear Sirs:
Subject: Letters of credit to secure post-employment obligations
XXXXXXXXXX
Question 21 of the 1995 Round Table of the Association de planification fiscale et financière ("APFF") seemed to represent a return to an earlier position of the Department stated in Question 29 of the 1988 Round Table of the Canadian Tax Foundation (CTF) and a departure from the position stated in Question 48 of the 1992 Round Table of the CTF.
We are of the view that the Department's position stated recently is not inconsistent with the prior position stated at the 1992 CTF conference. The facts of the situation stated at the 1995 APFF conference can be distinguished from those stated at the 1992 CTF conference. In the situation stated in 1992, the employer establishes a trust and contributes cash to the trustee in an amount equal to the fee charged by the bank for issuing the letter of credit to the trust. In this example, the letter of credit is acquired by the trust and therefore does not constitute a contribution made by the employer. On the other hand, at the 1995 APFF conference, the employer provides a letter of credit (not cash) to the union. Consequently, the FMV of the letter of credit is considered as a contribution to an RCA.
We trust the above comments will be of assistance to you. If you have any questions do not hesitate to contact Adèle St-Amour at (613) 957-8953.
for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5
© Her Majesty the Queen in Right of Canada, 1996
Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistributer de l'information, sous quelque forme ou par quelque moyen que ce soit, de facon électronique, méchanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.
© Sa Majesté la Reine du Chef du Canada, 1996
Email this Content