Words and Phrases - "agreement"
16 November 2001 Internal T.I. 2001-0095617 F - ACCORD ECRIT RETROACTIF GARDE D'ENFANTS
After finding that a letter signed by the two separated spouses did not constitute an “agreement” for purposes of the “support amount” and “commencement day” definitions, the Directorate went on to state:
A written agreement subsequent to an order could, in certain circumstances, be valid for the purposes of applying the terms "commencement day", "support amount" and "child support amount" if such an agreement corresponded to the reality of a situation of shared financial and parental responsibilities and if the agreement was a valid contract between two parties having the effect of creating mutual obligations. This would mean recognizing not only changes in support payments but also changes in custody of a child or children. Consequently, it would allow eligibility in certain cases for the wholly dependent person credit pursuant to paragraph 118(1)(b).
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 118 - Subsection 118(5) | subsequent letter was not an agreement eliminating a support obligation in respect of one of the two children | 217 |
19 September 2016 Internal T.I. 2016-0641841I7 - Employee stock option rules
In response to several enquiries from auditors on the meaning of “agreement” for the purposes of ss. 7 and 110(1)(d), the Directorate first referenced the Placer Dome, Chrysler and McAnulty decisions, and stated:
These cases stand for the proposition that an arrangement to issue or sell shares need not be a detailed written contract to fall within the scope of section 7 or paragraph 110(1)(d), but nonetheless must create legally binding rights and enforceable obligations.
This principle was confirmed in Transalta… .
The Directorate then discussed this issue in the context of various types of plans.
Respecting a discretionary share bonus plan (where “the corporation determines at the end of the [3-year] period the number of shares earned and whether the bonus would be paid in the form of shares issued from treasury or cash equivalent.,” it stated:
Because the corporation’s commitment remains fully discretionary at all times, the arrangement does not give rise to a legally binding agreement for the purposes of section 7. Therefore, where the corporation opts to settle the bonus by issuing shares, paragraph 7(3)(b) does not apply to prohibit the corporation from deducting the bonus expense.
Similarly, a fully discretionary stock bonus plan without a cash option will also fall outside section 7 where the granting of the awards and the issuance of the shares is made concurrently. However, if the eventual issuance of the shares is subject to time or other objective vesting conditions, it is our view that section 7 would apply. …
A share bonus plan that has been designed to avoid the application of paragraph 7(3)(b) (by the inclusion of a discretionary cash settlement option) will also need to… [qualify as a] three-year bonus plans… deferred share unit plan… .
Respecting a SAR or DSU plan, because “there is no agreement to issue shares…[i.e.,] the corporation is free to choose the form in which the payment will be made (which includes cash) [a]ccordingly, paragraph 7(3)(b) will not apply… .
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - 101-110 - Section 110 - Subsection 110(1) - Paragraph 110(1)(d) | no agreement to issue shares if vesting in employer's discretion | 263 |
| Tax Topics - Income Tax Act - Section 7 - Subsection 7(2) | no agreement if allocation of shares in trustee's discretion | 284 |
Transalta Corporation v. The Queen, 2012 DTC 1106 [at at 3044], 2012 TCC 86
Near the beginning of each year, the taxpayer would notify each of its executives that an award of units (within a specifed range) would be made to the executive in respect of the three-year compensation period commencing with that year, which would then be used to determine, within 120 days after the end of that compensation period, the bonus that would be paid to the executive in respect of the compensation period. Bonuses were paid at the option of the taxpayer in cash or shares with full stated capital.
Margeson J. found that the taxpayer's deduction of the amount of the bonuses which were paid in treasury shares was not barred under s. 7(3)(b) because such shares were not paid or issued pursuant to an "agreement." The word "agreement" in s. 7 refers only to legally binding agreements, meaning contracts. There was no "meeting of the minds" that could have led to the formation of a bilateral contract (para. 71), nor did the employees do or refrain from doing anything specified in an offer for a unilateral contract (para. 86). The implicit notion that the bonuses would be earned through superior work performance was not enough to constitute an offer (para. 85). Even if there had been an agreement to pay bonuses, they could have been paid entirely in cash, so there was no agreement to issue securities.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - General Concepts - Payment & Receipt | past services | 42 |
| Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(a) - Incurring of Expense | 61 |
Mansfield v. The Queen, 83 DTC 5136, [1983] CTC 97 (FCTD), aff'd 84 DTC 6535, [1984] CTC 547 (FCA)
In 1972, the taxpayer and other employees of a private company were offered convertible debentures of their employer which, in the case of the taxpayer, had a principal amount of $5,000. When in 1977 the taxpayer exercised the conversion rights under his debenture to acquire shares of his employer with a fair market value of $11,700, he was deemed by s. 7(1)(a) to receive a taxable benefit equal to the difference between such fair market value and the $5,125 price for which his convertible debenture had been issued to him. This benefit was not exempted from taxation by s. 51, which only dealt with the adjusted cost base of the shares and whether there had been a disposition, and did not deem the exchange to be non-taxable.
Mahoney, J. also stated (at p. 5138 DTC) that "'agree' and 'agreement' are not terms of art or technical expressions," so that the acquisition option embedded in the terms of the debenture represented an agreement with the employer.
The Court of Appeal rejected a submission that the $11,700 value of the debenture in 1977 constituted the "amount paid" for purposes of s. 7(1)(a), as this interpretation "would have the effect of rendering that subsection of no effect."
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 246 - Subsection 246(1) | 80 |
Hovasse v. The Queen, 2011 DTC 1115 [at at 622], 2011 TCC 143 (Informal Procedure)
When a married couple separated, the husband's support payments made pursuant to their "summary of mediated agreements" were deductible. The summary was enough to satisfy the requirement in s. 56.1(4) for an agreement in writing, given that mediated agreements had been finalized and adhered to. Hogan J. stated at para. 11:
The [Minister] also argued that the mediated agreement contained a warning that it could not be construed as a contract or court judgment, meaning it was not intended to be binding. This does not necessarily mean that the parties could not have intended or did not intend to be bound by the agreement. The statement seems to be more of a notification that further steps were required in order for the agreement to be enforceable in a court of law. The parties may not have filed the agreement with a court having jurisdiction in that regard, as advised, but the Appellant gave a reasonable explanation for not doing so, stating that he and his former spouse wanted to avoid legal costs.
Hogan J. attached little weight to the lack of a signature, given that Shaw (2007 TCC 148) and Foley (2000 UDTC 174, [2000] 4 C.T.C. 2016 (TCC)) clearly establish that a signature is not required.
McAnulty v. The Queen, 2001 DTC 942 (TCC)
The time at which the taxpayer's employer agreed to issue shares to her was the time at which the president called her to his desk and told her that he was going to issue to her 45,000 stock options at a $1.50, rather than at the later date when a written stock option agreement was signed by the president and a related directors' resolution was passed. The president had ostensible authority to commit the company to issue shares to her (notwithstanding that the Board of Directors in fact had not delegated this authority to him as required by the stock option plan), and failure to comply, on the earlier date, with a stipulation in the stock option plan that the options be granted to her pursuant to a written and approved stock option agreement related to failure to comply with administrative rules rather than invalidating the grant. Bowman T.C.J. noted (at p. 948) that "the words 'agree' or 'agreement' generally connote to a lawyer a binding contractual commitment" but then stated (at p. 950) that "a broader approach to the interpretation of 'agree' and 'agreement' in paragraph 110(1)(d) is required if the object of that paragraph is to be achieved".
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - General Concepts - Effective Date | stock option agreement effective time of oral agreement (not yet ratified by board) | 147 |
R. v. Kakfwi, 99 DTC 5639, [1999] 4 CTC 264 (FCA)
In finding that s. 90 did not apply to salary paid to an Indian band chief pursuant to a federal funding program known as Band Support Funding, Marceau J.A. stated (at p. 5642) that an "agreement" in the context of that agreement was "'ancillary agreement' - that is to say an agreement in the nature of a treaty or attached to a treaty".