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 CCRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.
Principal Issues:
Does the seizure of property held in a DPSP offend paragraph 147(2)(e) which prohibits the surrender or assignment of any rights or interests of a beneficiary of a DPSP?
Position: No.
Reasons:
Paragraph 128(2)(a) deems the trustee in bankruptcy to be the agent for the bankrupt even though the bankrupt's assets vest with the trustee by operation of the bankruptcy statutes. Since an agent acts on behalf of the principal, there is no change in the legal ownership of the assets of the DPSP and paragraph 147(2)(e) is not offended.
XXXXXXXXXX 2003-000703
G. Kauppinen
April 3, 2003
Dear XXXXXXXXXX:
Re: Bankruptcy Trustee Seizing Assets of Deferred Profit Sharing Plan ("DPSP")
We are writing in reply to your letter dated March 5, 2003 wherein you requested our confirmation that the views expressed in our document E9415435, regarding the application of paragraph 147(2)(e) of the Income Tax Act (the "Act") in a situation where the beneficiary employee of a DPSP (the "Plan") becomes bankrupt and the trustee in bankruptcy seizes the employee's rights to assets under the DPSP, continue to reflect the views of the Canada Customs and Revenue Agency ("CCRA").
Opinions concerning proposed transactions involving specific taxpayers will only be provided in response to a request for an advance income tax ruling. For more information concerning advance income tax rulings, please refer to Information Circular 70-6R5 dated May 17, 2002, issued by the CCRA. Consequently, we can only provide you with the following general comments.
Subsection 147(2) contains the conditions for the registration of a DPSP. Paragraph 147(2)(e) states that the plan must include a provision stipulating that no right or interest under the plan of an employee who is a beneficiary thereunder is capable, either in whole or in part, of surrender or assignment.
Paragraph 128(2)(a) of the Act deems the trustee in bankruptcy be the agent of the bankrupt for all purposes of the Act.
CCRA's position continues to be as expressed in document E 9415435, that in a contract of agency, the trustee in bankruptcy acts as agent for the principal (i.e. the employee beneficiary of the DPSP) and therefore the ownership of rights and interests in the DPSP remain with the employee beneficiary. Consequently, paragraph 147(2)(e) is not offended by the fact that the employee beneficiary of the DPSP is a bankrupt.
We trust that these comments will be of assistance.
Yours truly,
Mickey Sarazin, C.A.
for Director
Financial Industries Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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