9 April 1998 External T.I. 9805465 - DSLP-SUBSEQUENT AMENDMENT

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

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:

Can a deferred salary leave plan be modified without losing its status as prescribed plan?

Position: Yes;

Reasons:

So long as all the requirements of 6801(a) of the Regulations continue to be met.

5-980546
XXXXXXXXXX Fouad Daaboul

Attention: XXXXXXXXXX

April 9, 1998

Dear Sirs:

Re: Deferred Salary Leave Plan (the "Plan")

This is in reply to your letter of February 17, 1998, wherein you requested a response to a factual situation which involves specific taxpayers. Confirmation of tax consequences with respect to proposed transactions involving specific taxpayers will only be provided in response to a request for an advance income tax ruling submitted in accordance with Information Circular 70-6R3 dated December 30, 1996. However, we provide the following general comments which may or may not apply to taxpayers involved in your request and which, in accordance with the above-mentioned Information Circular, are not binding on the Department.

In your letter you did not state whether the Plan is a prescribed plan pursuant to paragraph 6801(a) of the Income Tax Regulations (the "Regulations") and, as such, excluded from the salary deferral arrangement provision of the Income Tax Act. It is the Department's view that such a plan may be amended and continue to qualify as a prescribed plan providing the conditions in paragraph 6801(a) of the Regulations continue to be met. Subject to clause 6801(a)(i)(A) of the Regulations which allows for a three month leave for certain educational purposes, the leave of absence period can not be less than six consecutive months pursuant to clause 6801(a)(i)(B) of the Regulations. Consequently, the Plan can be amended to reduce the leave of absence from one year to a six month period and still comply with the above-mentioned Regulation, assuming all other conditions continue to be met.

We trust these comments will be of assistance.

Yours truly

Paul Lynch
for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch