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.
Date July 14, 1986
TO - Assessing and Enquiries Directorate Enquiries Program Section
Head Office Financial Industries Division T.D. Peters
995-0051 ATTENTION Mr. Jack Szeszycki
RE: Deferred Salary - Leave Plan
As discussed by telephone we are forwarding the attached correspondence received from the Thunder Bay District Office for your consideration.
It is our view that the following points are problems in this plan however only the first has the effect of putting the plan offside:
1. Clause XXXX provides that a teacher may withdraw from the plan any time prior to March 15 of the calendar year in which the leave is to be taken. Any exceptions to the aforesaid shall be at the discretion of the Board. This provision would appear to allow the teacher to obtain his money at any time, except in very unusual circumstances which are not detailed in the plan. Our position therefore is that the contributions made to the plan are taxable in the year they are made because these funds have been constructively received by the teachers.
2. While not required to be provided for under the plan it should be brought to their attention that the teachers are subject to the interest accrual rules pursuant to subsection 12(4) of the Act, which require them to bring the interest earned in the plan into their income every 3 years unless they elect to include it in income annually.
3. Our position on such plans is that in any one year the teacher cannot have a percentage of his salary deferred in excess of the percentage that year is of the total number of years in the plan including the leave year. For example where deductions are to be made for four years with the fifth year being the leave year then no more than 20% of the teacher's salary may be deferred in any year.
Due to the fact that a "ruling" was issued in 1978, we would ask that you review the matter to determine what action is required by the District Office, keeping in mind that there are teachers who will presently be in the middle of their salary deferral period, to provide for years leave of absence.
We would ask that you reply directly to Thunder Bay District Office at which time you may wish to incorporate the concerns we have expressed. A copy of your reply would be appreciated.
Director Financial Industries Division Rulings Directorate Legislative and Intergovernmental Affairs Branch
Attachments
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