A.B. Adler (613)957-8962
February 10, 1989
Dear Sirs
Re: Your reference XXXX Employee Stock-Purchase Plan
This is in reply to your letter dated November 22, 1988 concerning the eligibility for capital gains deductions under section 110.6 of the Income Tax Act where certain shares were acquired pursuant to an employee stock purchase plan.
In your example employees will purchase units of an inter vivos trust from the trustee of an employee stock purchase plan trust. The trustee will then use the sale proceeds to purchase shares of the employer company. We concur that this trust will not qualify as an individual for purposes of the definition of a "qualified small business corporation share" in subsection 110.6(1) of the Act.
The issue that you have raised concerns tax policy and, as such, is the responsibility of the Honourable Michael H. Wilson, Minister of Finance. We have therefore forwarded a copy of your letter to him for his information.
We regret the delay in replying to your letter.
Yours truly,
Director Financial Industries Division Rulings Directorate