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 stock bonus plans are subject to section 7.
Position:
Yes.
Reasons:
Long-standing position.
961611
XXXXXXXXXX P. Spice
Attention: XXXXXXXXXX
June 26, 1996
Re: Section 7 and Stock Bonus Plans
This is in reply to your letter of May 1, 1996, in which you describe a particular stock bonus plan and request us to confirm the tax consequences to the participants.
Your enquiry relates to a specific plan and we are unable to provide a technical interpretation concerning the possible tax consequences for participants except in the context of an advance income tax ruling. We can provide the following general comments, however.
As you point out, the Department's general position regarding stock bonus plans is contained in Interpretation Bulletin IT-113R3. In paragraph 3 thereof, the statement is made that section 7 applies where a corporate employer issues shares to an employee as a salary bonus or under a stock bonus plan.
We also confirm that where the employer agrees to issue shares to employees as a form of bonus, the specific provisions of section 7 take precedence over the more general provisions in Part I and, indeed, this is required by paragraph 7(3)(a) of the Act. This was confirmed by the Federal Court (Trial Division) in M.N.R. v. Chrysler Canada Ltd. et al. 92 DTC 6346 which also relied on a principle of legislative construction, generalibus specialia derogant, to reach this conclusion.
Although the forgoing comments are not binding on the Department, we trust they are helpful.
Yours truly,
for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
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