10 October 2025 External T.I. 2025-1076451E5 - Shareholder Loans to Market Maker Trusts

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.

XXXXXXXXXX									2025-107645
									      R McPherson 

October 10, 2025

Dear XXXXXXXXXX:

We are writing in response to your correspondence of August 21, 2025, in which you ask for our views on the application of subsection 15(2.5) of the Income Tax Act (the “Act”) in the following situation:

1. A Parent company (Parentco) wholly owns all the shares of multiple corporations (Opcos), each operating a business division within the Parentco group. Each of Parentco and the Opcos is a “private corporation” as that term is defined in subsection 89(1) of the Act.

2. Parentco and the Opcos have employees. For greater certainty, all the corporations in the Parentco group are related within the meaning of subsection 251(2) of the Act.

3. The Parentco group has an employee share ownership plan that allows employees of Parentco and the Opcos to acquire and sell shares of Parentco.

4. The Parentco group would like to establish a trust, as described in subsection 15(2.5), to purchase and sell shares held by employees of Parentco and the Opcos.

With reference to the circumstances described above, you asked us whether:

• Parentco or any of the Opcos could be the settlor and sole beneficiary of the trust;
• Parentco or any one of the Opcos would, regardless of which other corporation in the Parentco group is the settlor and sole beneficiary of the trust, be “another corporation related to the corporation” in paragraph 15(2.5)(c).

OUR COMMENTS

The following is intended to provide our general comments regarding the application of subsection 15(2.5) of the Act in the circumstances described above. It is not our intention to confirm the income tax treatment of any specific taxpayer. The income tax treatment of any specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC70-6R12, Advance Income Tax Rulings and Technical Interpretations.

Subsection 15(2.5)

Subsection 15(2.5) of the Act contains an exception to the income inclusion rule in subsection 15(2) for certain loans made or debts that arise in respect of a trust where the lender or creditor is a private corporation that is the settlor and sole beneficiary of the trust, and the sole purpose of the trust is to facilitate the purchase and sale of the shares of the corporation, or of another corporation related to the corporation, from or to certain the employees of the corporation or of the related corporation.

Subsection 15(2.5) states:

Subsection (15)(2) does not apply to a loan made or a debt that arose in respect of a trust where

(a) the lender or creditor is a private corporation;

(b) the corporation is the settlor and sole beneficiary of the trust;

(c) the sole purpose of the trust is to facilitate the purchase and sale of the shares of the corporation, or of another corporation related to the corporation, for an amount equal to their fair market value at the time of the purchase or sale, as the case may be, from or to the employees of the corporation or of the related corporation (other than employees who are specified employees of the corporation or of another corporation related to the corporation), as the case may be; and

(d) at the time the loan was made or the debt incurred, bona fide arrangements were made for repayment of the loan or debt within a reasonable time.

In the circumstances described above, we are of the view that either Parentco or any of the Opcos could be the settlor and sole beneficiary of the trust. With respect to the application of paragraph 15(2.5)(c), it is our view that the reference in that paragraph to another corporation related to the corporation may include more than one corporation related to the settlor of the trust. Further, we are of the view that, in the circumstances described above, Parentco or any of the Opcos could settle the trust for the purpose of purchasing and selling the shares of Parentco from or to eligible employees of Parentco or any of the Opcos.

We trust that the foregoing adequately addresses your questions.

Yours truly,

Daryl Boychuk
For Division Director
Reorganizations Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch