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:
Whether trust company is a trustee or agent/custodian under employee stock ownership agreements with corporate employer.
Position TAKEN:
Not our job to determine.
Reasons FOR POSITION TAKEN:
Relationship is created by agreement between parties and is not determined under the ITA.
XXXXXXXXXX 940778
Attention: XXXXXXXXXX
April 7, 1994
Dear Sirs:
Re: Employee Share Ownership Plan (ESOP)
This is in reply to your facsimile transmission of March 24, 1994, in which you ask us whether the above-noted arrangement results in a trust or agency/custodian relationship. You advise that you administer ESOP's on behalf of your corporate clients and that these plans are governed by section 7 of the Income Tax Act (unless as otherwise stated all references to this statute are to the Income Tax Act S.C. 1970-71-72, c.63 as amended, consolidated to June 10, 1993 - the "Act").
The particular provisions of section 7 of the Act which deal with trusts are contained in subsections 7(2) and (6). Neither of these provisions creates a trust relationship or deems such a relationship to exist. Rather, if the shares are held by the recipient as trustee then one or the other of subsection 7(2) or (6) may apply. Whether a trust is established depends on the terms of the arrangement into which the parties enter.
The Department is not in a position to confirm the non-tax results of your arrangements with your corporate clients. We agree that your responsibilities under the Act depend on whether you are a trustee or an agent/custodian, but you must determine in which capacity you are acting under the ESOP's.
Yours truly,
for Director
Financial Industries Division
Rulings Directorate
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