Regulation 4800.1

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McNeeley v. The Queen, 2020 TCC 90

prescribed trust and EBP are mutually exclusive

The founding shareholder of a software company received the lion’s share of a distribution of the company shares held by an EBP. Before rejecting the individual’s argument that he was not taxable on the distribution because it was received by him qua founding shareholder rather than qua CEO (he received about 70% of the distribution so that there was no unacceptable dilution), Russell J found that the Trust was not a prescribed trust (referenced, for example, in s. 107(2)), stating (at para. 31):

As paragraph (a) of the subsection 108(1) “trust” definition excludes EBP trusts from any and all references to “trust” in section 107, while at the same time certain provisions of section 107 constitute the statutory basis for prescribed trusts, it would seem no EBP could concurrently be a prescribed trust. In particular, the Trust, being an EBP, cannot as well be a prescribed trust.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Employee Benefit Plan a substantial distribution from an EBP to the founding shareholder was made to him qua employee, and was taxable 515

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