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:
Whether a plan that has a deferral period of a one year and a deferral salary not exceeding 33 1/3 % of annual salary is considered to be a prescribed plan;
Position: Could be;
Reasons:
Subject to all other requirements of 6801(a) of the Regulations.
980417
XXXXXXXXXX Fouad Daaboul
Attention: XXXXXXXXXX
April 15, 1998
Dear Sirs:
Re: Paragraph 6801(a) of the Income Tax Regulations (the "Regulations")
This is in reply to your letter of February 10, 1998, wherein you requested clarification on ATR-39, deferred salary leave plan.
Your first concern is when the leave of absence should commence. Pursuant to subparagraph 6801(a)(i) of the Regulations, the leave of absence may commence at any time after the moment which is the commencement of the deferral period but not later than six years after that moment.
The second concern is the amount of salary deferred by an employee in a year of the deferral period. Subparagraph 6801(a)(ii) of the Regulations requires that the annual deferral amount not exceed 33 1/3 % of the employee's annual expected salary.
In our opinion, where a plan or arrangement has deferral period of one year and a deferred amount not exceeding 1/3 of the annual salary for that year, subject to all other requirements of paragraph 6801(a) of the Regulations, it would be considered a prescribed plan or arrangement for the purposes of paragraph (l) of the definition "salary deferral arrangement" in subsection 248(1) of the Income Tax Act.
We trust these comments will be of assistance.
Yours truly
Paul Lynch
for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
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