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 employer can contribute treasury shares to RPP and take deduction equal to value of shares.
Position TAKEN:
Yes if not a prohibited investment and permitted by terms of plan.
Reasons FOR POSITION TAKEN:
Update of previous position.
XXXXXXXXXX 951780
Attention: XXXXXXXXXX
September 27, 1995
Dear Sirs:
Re: Pension Contributions of Treasury Shares
This is in reply to your facsimile transmission of July 7, 1995, in which you ask whether an employer may claim a tax deduction in the amount of the value of treasury shares contributed to a registered pension plan.
Employer contributions made to a registered pension plan are deductible pursuant to paragraph 20(1)(q) of the Income Tax Act (the "Act"). In addition, contributions in-kind must not contravene the investment restrictions imposed by section 8514 of the Income Tax Regulations (the "Regulations"). Lastly, the terms of the pension plan as registered may restrict an employer in the methods it uses to fund the plan or the type of investments the plan may hold.
A share of a participating employer is a prohibited investment for a registered pension plan (subsection 8514(1) of the Regulations). Paragraph 8514(2)(b) of the Regulations, however, exempts an employer share that is listed on a prescribed stock exchange in Canada or outside Canada. A registered pension plan may accept or acquire, therefore, an employer share listed on a prescribed stock exchange subject, as mentioned above, to any restrictions imposed by the terms of the plan as registered. Note also the restrictions placed on corporations by provisions in business corporations legislation such as subsection 25(3) of the Canada Business Corporations Act.
The amount of the contribution for purposes of the deduction under paragraph 20(1)(q) would be equal to the fair market value of the shares contributed.
Although the foregoing comments are an expression of opinion only and are not binding on the Department, we trust they are of assistance.
Yours truly,
for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
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