19 June 1996 External T.I. 9620105 - DEF SAL LEAVE PLAN REVIEW

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.

962010
XXXXXXXXXX M.P. Sarazin

Attention: XXXXXXXXXX

June 19, 1996

Dear Sirs:

Re: Deferred Salary Leave Plan (the "Plan")

This is in reply to your letter of May 28, 1996, enclosing a copy of the above-noted Plan and requesting us to review it to ensure it complies with paragraph 6801(a) of the Income Tax Regulations (the "Regulations").

Enclosed for your information is a copy of Income Tax Ruling ATR-39 on the topic of deferred salary leave plans. We will refer to the paragraphs in this publication when commenting on amendments which should be made to your Plan.

The Plan defines "Regulations" to mean regulations under the Income Tax Act (Canada) when, in fact, "Regulations" mean Income Tax Regulations.

The Regulations require that the deferral period be no longer than six years in length. In Clause 7.1 of the Plan, a participant may suspend participation in the Plan for one year without any mention of the six year limitation. We suggest that you amend the referral to "clauses 4.4 and 4.5" in the definition of deferral period to "clauses 4.4, 4.5 and 7.1". In addition, interest income earned on the deferred compensation is considered to be employment income and must be reported as such by the Board (see 7.3 of ATR-39).

The Plan does not refer to Canada Pension Plan contributions or to Unemployment Insurance premiums but we draw your attention to the Editor's Note in ATR-39 concerning these topics. It is not required that these matters be referred to in your Plan.

Although these comments are an expression of opinion only and not binding on the Department, we trust that they are of assistance.

Yours truly,

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