Paragraph 107.1(a)
See Also
Scott v. The Queen, 2017 TCC 224
In 1980, Nortel had established a health and welfare trust (the “HWT”) for its employees. Following its insolvency and filing under the CCAA (with the related CCAA proceedings being court-supervised), it made lump sum payments in 2011 to the four taxpayers, pursuant to a court-approved settlement agreement, in satisfaction of their entitlement to payments under the HWT. Before going on to address whether these distributions were taxable to the taxpayers under s. 6 or 56, Sommerfeldt J stated (at para 66):
Counsel for the Appellants acknowledged that the rollover provisions in section 107.1 of the ITA do apply to the HWT, as it is a trust described in paragraph (a.1) of the definition “trust” in subsection 108(1) of the ITA. The effect of paragraphs 107.1(a) and (c) of the ITA, which are the applicable provisions, is that neither the HWT nor the Appellants realized a gain or a loss on, respectively, the disposition of property by the HWT when making the distributions or the disposition by the Appellants of parts of their respective interests in the HWT in exchange for the distributions.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Other Legislation/Constitution - Federal - Tax Court of Canada Rules (General Procedure) - Section 89 - Subsection 89(1) - Paragraph 89(1)(a) | trust return not admitted at trial opening where no previous notice and not relied upon by CRA | 229 |
| Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(a) | a distribution from a health and welfare trust to compensate for lost insurance coverage was not a taxable benefit as it did not come within s. 6(4) | 316 |
| Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(a) - Subparagraph 56(1)(a)(iii) | payment made as compensation for termination of monthly death benefits was paid, at the least, in lieu of a death benefit | 249 |
| Tax Topics - General Concepts - Stare Decisis | Supreme Court obiter accorded deference | 153 |
| Tax Topics - Income Tax Act - Section 9 - Compensation Payments | surrogatum principle references "why the compensatory amount was paid," and not confined to business receipts | 207 |
| Tax Topics - Statutory Interpretation - Specific v. General Provisions | termination payment that did not come within s. 6(4) should be treated as excluded from s. 6(1)(a) | 153 |
| Tax Topics - Income Tax Act - Section 6 - Subsection 6(4) | lump sum received as compensation for no longer benefiting from contributions to a group life insurance policy did not come within the terms of s. 6(4) | 334 |
Paragraph 107.1(b)
Administrative Policy
8 October 2010 Roundtable, 2010-0373561C6 F - Régime de prestations aux employés et article 7
S. 107.1(b) provides that where an employee benefit plan trust (the "Trust") distributes shares held by the Trust to an employee beneficiary, the Trust is deemed to have disposed of the shares for proceeds equal to their cost amount immediately before that time and the employee is deemed to have acquired the shares at a cost equal to the greater of their fair market value ("FMV") and the adjusted cost base of the employee's interest in the Trust (generally of nil). Does this mean that any appreciation in the value of the shares accumulated during the period the shares are held by the Trust is tax-free since the employee is deemed to acquire them at their FMV? CRA responded:
Generally, it is the CRA's position that where the provisions of section 7 apply to a particular fiduciary plan, then none of the provisions relating to employee benefit plans, including those of section 107.1, apply. The question of whether a particular fiduciary plan falls within the provisions of section 7 is one of fact and law that can only be resolved by an examination of the plan and all relevant facts.