| 19(1) | File No. 5-8729 |
| A.B. Adler | |
| (613) 957-8962 |
October 25, 1989
Dear Sirs:
This is in reply to your letter dated September 19, 1989 in which you requested our views concerning the income tax implications os a proposed replacement of the trustees of an employee benefit plan (EBP) with new trustees.
You indicated that the successor trustees would want to provide investment management services using its own investment vehicles which would involve the redemption of EBP investments, the transfer of EBP assets to the successor trustee and the purchase of new investments for the new EBP trust. Further, the plan sponsor would be reluctant to proceed if the proposed transfer triggered a capital gain.
As indicated in paragraph 23 of Information Circular 70-6R we do not provide written opinions on proposed transactions. However, we are prepared to provide you with the following general comments.
Where provision for a change in the trustees of an EBP is provided for in the plan such a change, in itself, will not result in adverse income tax implications. However, the redemption or other disposition of EBP investments that are capital property under any EBP would result in capital gains or losses, as the case may be.
We trust that our comments will be of assistance to you.
Yours truly,
for DirectorFinancial Industries DivisionRulings Directorate