Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues: Will a deferred salary leave plan satisfy the conditions under paragraph 6801(a) of the Regulations?
Position: Yes
Reasons: All of the conditions are satisfied.
March 7, 2000
HALIFAX TSO HEADQUARTERS Don Gibson M.P. Sarazin Director (613) 824-5441
Attention: J. D Glennie 2000-001017
XXXXXXXXXX (the "Employer")
We are writing to you in response to your facsimile dated February 28, 2000, wherein you requested our comments regarding the deferred salary leave agreement between the Employer and XXXXXXXXXX (the "Employee").
The Employer and the Employee have entered into an agreement (the "Agreement") whereunder 25% of the Employee's salary for a period of two years beginning XXXXXXXXXX would be withheld to fund a six month leave of absence to be taken by the Employee on or about XXXXXXXXXX. The Employer has requested your confirmation that the Agreement satisfies the provisions of paragraph 6801(a) of the Income Tax Regulations (the "Regulations").
Comments
We have reviewed the Agreement and we recommend that you confirm that the Agreement satisfies the conditions of paragraph 6801(a) of the Regulations. However, the Employer should be advised that, in the future, any written agreements should clearly spell out the following:
(a) The date on which the deferral period is to begin, including the rights, if any, for the employer or employee to extend the deferral period. The agreement should state that the deferral period cannot exceed six years after the date that the deferrals begin (as required under subparagraph 6801(a)(i)).
(b) The agreement should clearly spell out how the deferred amount will be paid to the employee during the leave period. This will ensure that the deferred amounts are paid out before the end of the first taxation year that commences after the end of the deferral period (as required under subparagraph 6801(a)(iv)).
(c) The agreement should clearly state how the deferred amounts are held and that any amounts that may reasonably be considered to be interest accruing on the deferred amounts are paid to the employee at the end of each year as employment income (as required under subparagraph 6801(a)(iv)).
We trust that our comments will help you in drafting your response to the Employer's request.
Patricia Spice
for Director
Financial Industries Division
Income Tax Rulings Directorate