26 June 1996 External T.I. 9614805 - XXXXXXXXXX DSLP

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:

Review of 6801(a) plan.

Position:

Gave comments.

Reasons:

Routine.

									961480
XXXXXXXXXX							P. Spice

Attention: XXXXXXXXXX

June 26, 1996

Re: Deferred Salary Leave Plan

This is in reply to your letter of April 22, 1996, enclosing a copy of your draft Deferred Salary Plan agreement (the "Plan") for our review. We have reviewed the Plan and have the following comments.

1.XXXXXXXXXX: Please note that subparagraph 6801(a)(ii) of the Income Tax Regulations (the "Regulations") requires that no more than 33% of the employee's annual salary be deferred in each year of the deferral period. (Please refer to 2.2 of the enclosed ATR-39 "Deferred Salary Leave Plan".) Also note that annual salary relates to amounts received in the calendar year, and not in the school year.

2.XXXXXXXXXX: The Regulations state that during the leave of absence the employee may receive no salary or wages from the employer or a person or partnership related to the employer other than the deferred amounts and usual reasonable fringe benefits. The prohibition against payment by a related person or partnership should be included in your Plan.

3.XXXXXXXXXX: Where the deferred amounts are held in trust and earn interest, the interest earned must be paid to the employee in the year and reported by the employer on the T4 slip as employment income. The Plan does not constitute an "investment contract" as defined in subsection 12(11) of the Income Tax Act. (See 2.3 and 7.3 of ATR-39.)

4.XXXXXXXXXX: All deferred amounts must be paid to the employee no later than the end of the year commencing after the deferral period ends. This restriction should be added to XXXXXXXXXX. (See last sentence of 3.2 of ATR-39.)

5.XXXXXXXXXX: The Plan should state that the employee will return to employment for a period of time not less than the leave of absence. (See 6.1 of ATR-39.)

We trust our comments will be of assistance to you.

Yours truly,

for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch