W.C. Harding (613) 957-3499
August 29, 1988
Dear Sirs:
This is in reply to your letter of August 2, 1988 requesting technical interpretations on certain subject matter as provided therein.
We would first like to note that, as stated in our July 14, 1988 letter to you, technical interpretations cannot be provided by us in respect of factual and completed transactions. These may, however, be discussed with your local District Taxation Office. In our view, when a factual situation is augmented by additional and potentially hypothetical facts, this does not alter the fact that the underlying situation remains factual. Where the additional terms also reflect alternative courses of action being contemplated, an advance income tax ruling may be requested in accordance with Information Circular 70-6R, upon the determination of a specific course of action.
In accordance with the above and as advised in our previous letter we cannot address the specifics of your particular situation. However, as to your new queries as set out in your current letter we can respond, in general, as follows:
1. Where the coming-into-force provisions for RCA's are applicable to a plan established before October 9 1986 or established after October 8, 1986 pursuant to an agreement entered into before October 9, 1986 in general, a separate "statutory arrangement" is deemed to be established at the earlier of January 1, 1988 and any day after October 8, 1986 on which the plan has been materially altered. The statutory plan will be subject to the RCA provisions of the Income Tax Act (the Act) as will all contributions to, and property and income of the statutory plan.
2. Generally where an "existing" plan is not an RCA or SDA and is, accordingly, an EBP then, with respect to the members of the plan, it will be treated as an EBP and income and distributions from the plan will be treated in accordance with the EBP provisions of the Income Tax Act.
3. The coming-into-force provisions with respect to SDAs provides that where an SDA agreement was entered into before February 26, 1986 by a taxpayer and his employer or former employer, an amount which would otherwise be a "deferred amount" will be excepted from that definition where the amount is in respect of
a) services rendered by the taxpayer before July 1986; or
b) services rendered by the taxpayer after June 1986 where the taxpayer is obliged to defer receipt of the amount and cannot cancel or otherwise avoid that obligation.
4. Where a plan would, but for the coming-into-force provisions for SDA's, be subject to the provisions of the Act relating to SDAs, the plan falls into the exclusion contained in paragraph k of the RCA Definition.
5. In our opinion a plan which provides that benefits are to be payable only after a fixed period of time may or may not be an RCA. This could only be determined on a basis of all factual information available.
We trust that this letter clarifies our position on these matters.
Yours truly,
Wayne Douglas
for Director Financial Industries Division Rulings Directorate