4 January 2006 Internal T.I. 2005-0115801I7 F - Convention de retraite -- summary under Salary Deferral Arrangement

A closely-held corporation that was dividending out all the profits of its business also established a purported retirement compensation arrangement (RCA) trust for two employees (Mr. A and Mr. B) who, indirectly, were the corporation’s two shareholders, and made contributions to the trust that were funded by loans from the trust. After finding that the arrangement did not qualify as an RCA because the benefits were not reasonable, the Directorate went on to indicate that it also was not a salary deferral arrangement because “the contributions to the trustee would not relate to amounts accruing to Mr. A and Mr. B as salary or wages.”