On the sale by the Vendor of one of its business divisions, the employees of that division were transferred to the purchaser, and the assets of the defined benefit pension plan regarding those employees (the “Plan”) were transferred to the Purchaser and the Purchaser assumed the related pension commitments, in two transfers. There was an actuarial surplus respecting the Plan, which could allow the purchaser to enjoy a contribution holiday. On each transfer, the Purchaser paid an amount to the Vendor in respect of the actuarial surplus.
In finding that these amounts were taxable to the Vendor under s. 9, CRA noted that, from the Vendor’s perspective, such amounts essentially represented an adjustment to the amounts it had claimed as deductible contributions to the Plan (i.e., recognizing “that the employer has over the years paid an amount of employer contributions that exceeds the actual need of the plan and that an adjustment is necessary,”) and, before quoting Ikea in support of this statement, stated:
Since the employer's contributions to the plan give rise to deductions in computing the employer's business income, we are of the view that the amounts the employer receives in respect of such surplus assets must also be reflected in computing its business income.