T.B. Kuss (613) 957-2128
JUN 8 1988
Dear Sirs:
XXXX
This is in response to your letter dated January 25, 1988 in which you requested our confirmation of your view that the accumulating income in a taxation year on a portion of the XXXXXXXX pension plan applicable to the employees of who are working and resident in Canada, is not includable in the computation of the income of the Canadian employees in that taxation year.
The facts as we understand them are as follows:
XXXX
7. To the best of your knowledge none of the issues discusses herein is being considered by a District Office or Taxation Centre in connection with an income tax return previously filed and none of the issues contained herein is under objection or appeal.
We provide the following general comments.
In our opinion the American Plan appears to meet the general definition of an "employee benefit plan" fount in subsection 248(1) and does not appear to fit any of the exclusions described therein.
We agree that the American Plan does not meet the definition of "salary deferral arrangement" as the purpose test described therein has not been satisfied.
It is arguable that the American Plan meets the general definition of "retirement compensation arrangement" however, in respect of the Canadian employees, the plan appears to be "grandfathered" and therefore would not be a retirement compensation arrangement.
Provided the Canadian employees were not entitled to receive any amounts from the plan (i.e. it cannot be argued that the Canadian employees had "constructive receipt") the benefits accruing thereunder to the Canadian employees through the augmentation of the value of the Canadian Portion of the American Plan through the accumulation of income, would not be included in the income of any Canadian employees as a result of such augmentation.
We hope our opinion is of assistance, however as explained in paragraph 24 of information Circular 70-6R, dated December 18, 1978 expressions of opinion are not rulings and are not binding on the Department.
Yours truly,
for Director Reorganizations and Non-Resident Division Specialty Rulings Directorate Legislative and Intergovernmental Affairs Branch