Income Tax Act (R.S.C., 1985, c. 1 (5th Supp.))

Deferred Profit Sharing Plans

Marginal note:Definitions

• 147 (1) In this section,

  deferred profit sharing plan

  deferred profit sharing plan means a profit sharing plan accepted by the Minister for registration for the purposes of this Act, on application therefor in prescribed manner by a trustee under the plan and an employer of employees who are beneficiaries under the plan, as complying with the requirements of this section; (régime de participation différée aux bénéfices)

  forfeited amount

  forfeited amount, under a deferred profit sharing plan or a plan the registration of which has been revoked pursuant to subsection 147(14) or 147(14.1), means an amount to which a beneficiary under the plan has ceased to have any rights, other than the portion thereof, if any, that is payable as a consequence of the death of the beneficiary to a person who is entitled thereto by virtue of the participation of the beneficiary in the plan; (montant perdu)

  licensed annuities provider

  licensed annuities provider means a person licensed or otherwise authorized under the laws of Canada or a province to carry on in Canada an annuities business; (fournisseur de rentes autorisé)

  profit sharing plan

  profit sharing plan means an arrangement under which payments computed by reference to an employer’s profits from the employer’s business, or by reference to those profits and the profits, if any, from the business of a corporation with which the employer does not deal at arm’s length, are or have been made by the employer to a trustee in trust for the benefit of employees or former employees of that employer. (régime de participation aux bénéfices)

• Marginal note:Participating employer

  (1.1) An employer is considered to participate in a profit sharing plan where the employer makes or has made payments under the plan to a trustee in trust for the benefit of employees or former employees of the employer.

• Marginal note:Acceptance of plan for registration

  (2) The Minister shall not accept for registration for the purposes of this Act any profit sharing plan unless, in the Minister’s opinion, it complies with the following conditions:

  • (a) the plan provides that each payment made under the plan to a trustee in trust for the benefit of beneficiaries thereunder is the total of amounts each of which is required to be allocated by the trustee in the year in which it is received by the trustee, to the individual beneficiary in respect of whom the amount was so paid;

  • (a.1) the plan includes a stipulation that no contribution may be made to the plan other than

    • (i) a contribution made in accordance with the terms of the plan by an employer for the benefit of the employer’s employees who are beneficiaries under the plan, or

    • (ii) an amount transferred to the plan in accordance with subsection 147(19);

  • (b) the plan does not provide for the payment of any amount to an employee or other beneficiary thereunder by way of loan;

  • (c) the plan provides that no part of the funds of the trust governed by the plan may be invested in notes, bonds, debentures, bankers’ acceptances or similar obligations of

    • (i) an employer by whom payments are made in trust to a trustee under the plan for the benefit of beneficiaries thereunder, or

    • (ii) a corporation with which that employer does not deal at arm’s length;

  • (d) the plan provides that no part of the funds of the trust governed by the plan may be invested in shares of a corporation at least 50% of the property of which consists of notes, bonds, debentures, bankers’ acceptances or similar obligations of an employer or a corporation described in paragraph 147(2)(c);

  • (e) the plan includes a provision stipulating that no right of a person under the plan is capable of any surrender or assignment other than

    • (i) an assignment under a decree, an order or a judgment of a competent tribunal, or under a written agreement, that relates to a division of property between an individual and the individual’s spouse or common-law partner, or former spouse or common-law partner, in settlement of rights that arise out of, or on a breakdown of, their marriage or common-law partnership,

    • (ii) an assignment by a deceased individual’s legal representative on the distribution of the individual’s estate, and

    • (iii) a surrender of benefits to avoid revocation of the plan’s registration;

  • (f) the plan includes a provision stipulating that each of the trustees under the plan shall be resident in Canada;

  • (g) the plan provides that, if a corporation licensed or otherwise authorized under the laws of Canada or a province to carry on in Canada the business of offering to the public its services as trustee is not a trustee under the plan, there shall be at least 3 trustees under the plan who shall be individuals;

  • (h) the plan provides that all income received, capital gains made and capital losses sustained by the trust governed by the plan must be allocated to beneficiaries under the plan on or before a day 90 days after the end of the year in which they were received, made or sustained, as the case may be, to the extent that they have not been allocated in years preceding that year;

  • (i) the plan provides that each amount allocated or reallocated by a trustee under the plan to a beneficiary under the plan vests irrevocably in that beneficiary,

    • (i) in the case of an amount allocated or reallocated before 1991, at a time that is not later than 5 years after the end of the year in which it was allocated or reallocated, unless the beneficiary becomes, before that time, an individual who is not an employee of any employer who participates in the plan, and

    • (ii) in the case of any other amount, not later than the later of the time of allocation or reallocation and the day on which the beneficiary completes a period of 24 consecutive months as a beneficiary under the plan or under any other deferred profit sharing plan for which the plan can reasonably be considered to have been substituted;

  • (i.1) the plan requires that each forfeited amount under the plan and all earnings of the plan reasonably attributable thereto be paid to employers who participate in the plan, or be reallocated to beneficiaries under the plan, on or before the later of December 31, 1991 and December 31 of the year immediately following the calendar year in which the amount is forfeited, or such later time as is permitted in writing by the Minister under subsection 147(2.2);

  • (j) the plan provides that a trustee under the plan inform, in writing, all new beneficiaries under the plan of their rights under the plan;

  • (k) the plan provides that, in respect of each beneficiary under the plan who has been employed by an employer who participates in the plan, all amounts vested under the plan in the beneficiary become payable

    • (i) to the beneficiary, or

    • (ii) in the event of the beneficiary’s death, to another person designated by the beneficiary or to the beneficiary’s estate,

    not later than the earlier of

    • (iii) the end of the year in which the beneficiary attains 71 years of age, and

    • (iv) 90 days after the earliest of

      • (A) the death of the beneficiary,

      • (B) the day on which the beneficiary ceases to be employed by an employer who participates in the plan where, at the time of ceasing to be so employed, the beneficiary is not employed by another employer who participates in the plan, and

      • (C) the termination or winding-up of the plan,

      except that the plan may provide that, on election by the beneficiary, all or any part of the amounts payable to the beneficiary may be paid

    • (v) in equal instalments payable not less frequently than annually over a period not exceeding 10 years from the day on which the amount became payable, or

    • (vi) by a trustee under the plan to a licensed annuities provider to purchase for the beneficiary an annuity (other than an advanced life deferred annuity), if

      • (A) payment of the annuity is to begin not later than the end of the year in which the beneficiary attains 71 years of age, and

      • (B) the guaranteed term, if any, of the annuity does not exceed 15 years;

  • (k.1) the plan requires that no benefit or loan, other than

    • (i) a benefit the amount of which is required to be included in computing the beneficiary’s income,

    • (ii) an amount referred to in paragraph 147(10)(b),

    • (ii.1) an amount paid pursuant to or under the plan by a trustee under the plan to a licensed annuities provider to purchase for a beneficiary under the plan an annuity to which subparagraph (k)(vi) or (19)(d)(v) applies,

    • (iii) a benefit derived from an allocation or reallocation referred to in subsection 147(2), or

    • (iv) the benefit derived from the provision of administrative or investment services in respect of the plan,

    that is conditional in any way on the existence of the plan may be extended to a beneficiary thereunder or to a person with whom the beneficiary was not dealing at arm’s length;

  • (k.2) the plan provides that no individual who is

    • (i) a person related to the employer,

    • (ii) a person who is, or is related to, a specified shareholder of the employer or of a corporation related to the employer,

    • (iii) where the employer is a partnership, a person related to a member of the partnership, or

    • (iv) where the employer is a trust, a person who is, or is related to, a beneficiary under the trust

    may become a beneficiary under the plan; and

  • (l) the plan, in all other respects, complies with regulations of the Governor in Council made on the recommendation of the Minister of Finance.

• Marginal note:Terms limiting contributions

  (2.1) The Minister shall not accept for registration for the purposes of this Act a profit sharing plan unless it includes terms that are adequate to ensure that the requirements of subsection 147(5.1) in respect of the plan will be satisfied for each calendar year.

• Marginal note:Reallocation of forfeitures

  (2.2) The Minister may, on written application, extend the time for satisfying the requirements of paragraph 147(2)(i.1) where

  • (a) the total of the forfeited amounts arising in a calendar year is greater than normal because of unusual circumstances; and

  • (b) the forfeited amounts are to be reallocated on a reasonable basis to a majority of beneficiaries under the plan.

• Marginal note:Acceptance of employees profit sharing plan for registration

  (3) The Minister shall not accept for registration for the purposes of this Act any employees profit sharing plan unless all the capital gains of or made by the trust governed by the plan before the date of application for registration of the plan and all the capital losses of or sustained by the trust before that date have been allocated by the trustee under the plan to employees and other beneficiaries thereunder.

• Marginal note:Capital gains determined

  (4) For the purposes of subsections 147(3) and 147(11), such amount as may be determined by the Minister, on request in prescribed manner by the trustee of a trust governed by an employees profit sharing plan, shall be deemed to be the amount of

  • (a) the capital gains of or made by the trust governed by the plan before the date of application for registration of the plan, or

  • (b) the capital losses of or sustained by the trust before that date,

  as the case may be.

• Marginal note:Registration date

  (5) Where a profit sharing plan is accepted by the Minister for registration as a deferred profit sharing plan, the plan shall be deemed to have become registered as a deferred profit sharing plan

  • (a) on the date the application for registration of the plan was made; or

  • (b) where in the application for registration a later date is specified as the date on which the plan is to commence as a deferred profit sharing plan, on that date.

• Marginal note:Contribution limits

  (5.1) For the purposes of subsections 147(2.1) and 147(9) and paragraph 147(14)(c.4), the requirements of this subsection in respect of a deferred profit sharing plan are satisfied for a calendar year if, in the case of each beneficiary under the plan and each employer in respect of whom the beneficiary’s pension credit (as prescribed by regulation) for the year under the plan is greater than nil,

  • (a) the total of all amounts each of which is the beneficiary’s pension credit (as prescribed by regulation) for the year in respect of the employer under a deferred profit sharing plan does not exceed the lesser of

    • (i) 1/2 of the money purchase limit for the year, and

    • (ii) 18% of the amount that would be the beneficiary’s compensation (within the meaning assigned by subsection 147.1(1)) from the employer for the year if the definition compensation in subsection 147.1(1) were read without reference to paragraph (b) of that definition;

  • (b) the total of all amounts each of which is the beneficiary’s pension credit (as prescribed by regulation) for the year under a deferred profit sharing plan in respect of

    • (i) the employer, or

    • (ii) any other employer who, at any time in the year, does not deal at arm’s length with the employer

    does not exceed 1/2 of the money purchase limit for the year; and

  • (c) the total of

    • (i) the beneficiary’s pension adjustment for the year in respect of the employer, and

    • (ii) the total of all amounts each of which is the beneficiary’s pension adjustment for the year in respect of any other employer who, at any time in the year, does not deal at arm’s length with the employer

    does not exceed the lesser of

    • (iii) the money purchase limit for the year, and

    • (iv) 18% of the total of all amounts each of which is the beneficiary’s compensation (within the meaning assigned by subsection 147.1(1)) for the year from the employer or any other employer referred to in subparagraph 147(5.1)(c)(ii).

• (5.11) [Repealed, 2013, c. 34, s. 301]

• Marginal note:Deferred plan not employees profit sharing plan

  (6) For a period during which a plan is a deferred profit sharing plan, the plan shall be deemed, for the purposes of this Act, not to be an employees profit sharing plan.

• Marginal note:No tax while trust governed by plan

  (7) No tax is payable under this Part by a trust on the taxable income of the trust for a period during which the trust was governed by a deferred profit sharing plan.

• Marginal note:Amount of employer’s contribution deductible

  (8) Subject to subsection 147(9), there may be deducted in computing the income of an employer for a taxation year the total of all amounts each of which is an amount paid by the employer in the year or within 120 days after the end of the year to a trustee under a deferred profit sharing plan for the benefit of the employer’s employees who are beneficiaries under the plan, to the extent that the amount was paid in accordance with the terms of the plan and was not deducted in computing the employer’s income for a preceding taxation year.

• Marginal note:Limitation on deduction

  (9) Where the requirements of subsection 147(5.1) in respect of a deferred profit sharing plan are not satisfied for a calendar year by reason that the pension credits of a beneficiary under the plan in respect of a particular employer do not comply with paragraph 147(5.1)(a) or the beneficiary’s pension credits or pension adjustments in respect of a particular employer and other employers who do not deal at arm’s length with the particular employer do not comply with paragraph 147(5.1)(b) or 147(5.1)(c), the particular employer is not entitled to a deduction under subsection 147(8) in computing the particular employer’s income for any taxation year in respect of an amount paid to a trustee under the plan in the calendar year except to the extent expressly permitted in writing by the Minister, and, for the purposes of this subsection, an amount paid to a trustee of a deferred profit sharing plan in the first two months of a calendar year shall be deemed to have been paid in the immediately preceding year and not to have been paid in the year to the extent that the amount can reasonably be considered to be in respect of the immediately preceding year.

• Marginal note:No deduction

  (9.1) Notwithstanding subsection 147(8), no deduction shall be made in computing the income of an employer for a taxation year in respect of an amount paid by the employer for the year to a trustee under a deferred profit sharing plan in respect of a beneficiary who is described in paragraph 147(2)(k.2) in respect of the plan.

• Marginal note:Amounts received taxable

  (10) There shall be included in computing the income of a beneficiary under a deferred profit sharing plan for a taxation year the amount, if any, by which

  • (a) the total of all amounts received by the beneficiary in the year from a trustee under the plan (other than as a result of acquiring an annuity described in subparagraph 147(2)(k)(vi) under which the beneficiary is the annuitant)

  exceeds

  • (b) the total of all amounts each of which is an amount determined for the year under subsection 147(10.1), 147(11) or 147(12) in relation to the plan and in respect of the beneficiary.

• Marginal note:Single payment on retirement, etc.

  (10.1) For the purposes of subsections 147(10) and 147(10.2), where a beneficiary under a deferred profit sharing plan has received, in a taxation year and when the beneficiary was resident in Canada, from a trustee under the plan a single payment that included shares of the capital stock of a corporation that was an employer who contributed to the plan or of a corporation with which the employer did not deal at arm’s length on the beneficiary’s withdrawal from the plan or retirement from employment or on the death of an employee or former employee and has made an election in respect thereof in prescribed manner and prescribed form, the amount determined for the year under this subsection in relation to the plan and in respect of the beneficiary is the amount, if any, by which the fair market value of those shares, immediately before the single payment was made, exceeds the cost amount to the plan of those shares at that time.

• Marginal note:Idem

  (10.2) Where a trustee under a deferred profit sharing plan has at any time in a taxation year made under the plan a single payment that included shares referred to in subsection 147(10.1) to a beneficiary who was resident in Canada at the time and the beneficiary has made an election under that subsection in respect of that payment,

  • (a) the trustee shall be deemed to have disposed of those shares for proceeds of disposition equal to the cost amount to the trust of those shares immediately before the single payment was made;

  • (b) the cost to the beneficiary of those shares shall be deemed to be their cost amount to the trust immediately before the single payment was made;

  • (c) the cost to the beneficiary of each of those shares shall be deemed to be the amount determined by the formula

    A × B/C

    where

    A

    is the amount determined under paragraph 147(10.2)(a) in respect of all of those shares,

    B

    is the fair market value of that share at the time the single payment was made, and

    C

    is the fair market value of all those shares at the time the single payment was made; and

  • (d) for the purposes of paragraph 60(j), the cost to the beneficiary of those shares is an eligible amount in respect of the beneficiary for the year.

• Marginal note:Amount contributed to or forfeited under a plan

  (10.3) There shall be included in computing the income for a taxation year of a beneficiary described in paragraph 147(2)(k.2) the total of amounts allocated or reallocated to the beneficiary in the year in respect of

  • (a) any amount contributed after December 1, 1982 by an employer to, or

  • (b) any forfeited amount under

  a deferred profit sharing plan or a plan the registration of which has been revoked pursuant to subsection 147(14) or 147(14.1).

• Marginal note:Income on disposal of shares

  (10.4) Where a taxpayer has a share in respect of which the taxpayer has made an election under subsection 147(10.1), there shall be included in computing the taxpayer’s income for the taxation year in which the taxpayer disposed of or exchanged the share or ceased to be a resident of Canada, whichever is the earlier, the amount, if any, by which the fair market value of the share at the time the taxpayer acquired it exceeds the cost to the taxpayer, determined under paragraph (10.2)(c), of the share at the time the taxpayer acquired it.

• Marginal note:Amended contract

  (10.5) Where an amendment is made to an annuity contract to which subparagraph (2)(k)(vi) applies, the sole effect of which is to defer annuity commencement to no later than the end of the calendar year in which the individual in respect of whom the contract was purchased attains 71 years of age, the annuity contract is deemed not to have been disposed of by the individual.

• (10.6) [Repealed, 2007, c. 29, s. 20]

• Marginal note:Portion of receipts deductible

  (11) For the purposes of subsections 147(10), 147(10.1) and 147(12), where an amount was received in a taxation year from a trustee under a deferred profit sharing plan by an employee or other beneficiary thereunder, and the employee was a beneficiary under the plan at a time when the plan was an employees profit sharing plan, the amount determined for the year under this subsection in relation to the plan and in respect of the beneficiary is such portion of the total of the amounts so received in the year as does not exceed

  • (a) the total of

    • (i) each amount included in respect of the plan in computing the income of the employee for the year or for a previous taxation year by virtue of section 144,

    • (ii) each amount paid by the employee to a trustee under the plan at a time when it was an employees profit sharing plan, and

    • (iii) each amount that was allocated to the employee or other beneficiary by a trustee under the plan, at a time when it was an employees profit sharing plan, in respect of a capital gain made by the trust before 1972,

  minus

  • (b) the total of

    • (i) each amount received by the employee or other beneficiary in a previous taxation year from a trustee under the plan at a time when it was an employees profit sharing plan,

    • (ii) each amount received by the employee or other beneficiary in a previous taxation year from a trustee under the plan at a time when it was a deferred profit sharing plan, and

    • (iii) each amount allocated to the employee or other beneficiary by a trustee under the plan, at a time when it was an employees profit sharing plan, in respect of a capital loss sustained by the trust before 1972.

• Marginal note:Idem

  (12) For the purposes of subsections 147(10) and 147(10.1), where an amount was received in a taxation year from a trustee under a deferred profit sharing plan by an employee or other beneficiary thereunder, and the employee has made a payment in the year or a previous year to a trustee under the plan at a time when the plan was a deferred profit sharing plan, the amount determined for the year under this subsection in relation to the plan and in respect of the beneficiary is such portion of the total of the amounts so received in the year (minus any amount determined for the year under subsection 147(11) in relation to the plan and in respect of the beneficiary) as does not exceed

  • (a) the total of all amounts each of which was so paid by the employee in the year or a previous year to the extent that the payment was not deductible in computing the employee’s income,

  minus

  • (b) the total of all amounts each of which was received by the employee or other beneficiary from a trustee under the plan, at a time when it was a deferred profit sharing plan, to the extent that it was included in the computation of an amount determined for a previous year under this subsection in relation to the plan and in respect of the employee or other beneficiary.

• Marginal note:Appropriation of trust property by employer

  (13) Where funds or property of a trust governed by a deferred profit sharing plan have been appropriated in any manner whatever to or for the benefit of a taxpayer who is

  • (a) an employer by whom payments are made in trust to a trustee under the plan, or

  • (b) a corporation with which that employer does not deal at arm’s length,

  otherwise than in payment of or on account of shares of the capital stock of the taxpayer purchased by the trust, the amount or value of the funds or property so appropriated shall be included in computing the income of the taxpayer for the taxation year of the taxpayer in which the funds or property were so appropriated, unless the funds or property or an amount in lieu thereof equal to the amount or value of the funds or property was repaid to the trust within one year from the end of the taxation year, and it is established by subsequent events or otherwise that the repayment was not made as part of a series of appropriations and repayments.

• Marginal note:Revocation of registration

  (14) Where, at any time after a profit sharing plan has been accepted by the Minister for registration for the purposes of this Act,

  • (a) the plan has been revised or amended or a new plan has been substituted therefor, and the plan as revised or amended or the new plan substituted therefor, as the case may be, ceased to comply with the requirements of this section for its acceptance by the Minister for registration for the purposes of this Act,

  • (b) any provision of the plan has not been complied with,

  • (c) the plan is a plan that did not, as of January 1, 1968,

    • (i) comply with the requirements of paragraphs 147(2)(a), 147(2)(b) to 147(2)(h), 147(2)(j) and 147(2)(k), and paragraph 147(2)(i) of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, as it read on January 1, 1972, and

    • (ii) provide that the amounts held by the trust for the benefit of beneficiaries thereunder that remained unallocated on December 31, 1967 must be allocated or reallocated, as the case may be, before 1969,

  • (c.1) the plan becomes a revocable plan pursuant to subsection 147(21),

  • (c.2) the plan does not comply with the requirements of paragraphs 147(2)(a) to 147(2)(k) and 147(2)(l),

  • (c.3) in the case of a plan that became registered after March, 1983, the plan does not comply with the requirements of paragraphs 147(2)(k.1) and 147(2)(k.2),

  • (c.4) the requirements of subsection 147(5.1) in respect of the plan are not satisfied for a calendar year, or

  • (c.5) an employer who participates in the plan fails to file an information return reporting a pension adjustment of a beneficiary under the plan as and when required by regulation,

  the Minister may revoke the registration of the plan,

  • (d) where paragraph 147(14)(a) applies, as of the date that the plan ceased so to comply, or any subsequent date,

  • (e) where paragraph 147(14)(b) applies, as of the date that any provision of the plan was not so complied with, or any subsequent date,

  • (f) where paragraph 147(14)(c) applies, as of any date following January 1, 1968,

  • (g) where paragraph 147(14)(c.1) applies, as of the date on which the plan became a revocable plan, or any subsequent date,

  • (h) where paragraph 147(14)(c.2) or 147(14)(c.3) applies, as of the date on which the plan did not so comply, or any subsequent date, but not before January 1, 1991,

  • (i) where paragraph 147(14)(c.4) applies, as of the end of the year for which the requirements of subsection 147(5.1) in respect of the plan are not satisfied, or any subsequent date, and

  • (j) where paragraph 147(14)(c.5) applies, as of any date after the date by which the information return was required to be filed,

  and the Minister shall thereafter give notice of the revocation by registered mail to a trustee under the plan and to an employer of employees who are beneficiaries under the plan.

• Marginal note:Idem

  (14.1) Where on any day after June 30, 1982 a benefit or loan is extended or continues to be extended as a consequence of the existence of a deferred profit sharing plan and that benefit or loan would be prohibited if the plan met the requirement for registration contained in paragraph 147(2)(k.1), the Minister may revoke the registration of the plan as of that or any subsequent day that is specified by the Minister in a notice given by registered mail to a trustee under the plan and to an employer of employees who are beneficiaries under the plan.

• Marginal note:Rules applicable to revoked plan

  (15) Where the Minister revokes the registration of a deferred profit sharing plan, the plan (in this section referred to as the “revoked plan”) shall be deemed, for the purposes of this Act, not to be a deferred profit sharing plan, and notwithstanding any other provision of this Act, the following rules shall apply:

  • (a) the revoked plan shall not be accepted for registration for the purposes of this Act or be deemed to have become registered as a deferred profit sharing plan at any time within a period of one year commencing on the date the plan became a revoked plan;

  • (b) subsection 147(7) does not apply to exempt the trust governed by the plan from tax under this Part on the taxable income of the trust for a taxation year in which, at any time therein, the trust was governed by the revoked plan;

  • (c) no deduction shall be made by an employer in computing the employer’s income for a taxation year in respect of an amount paid by the employer to a trustee under the plan at a time when it was a revoked plan;

  • (d) there shall be included in computing the income of a taxpayer for a taxation year

    • (i) all amounts received by the taxpayer in the year from a trustee under the revoked plan that, by virtue of subsection 147(10), would have been so included if the revoked plan had been a deferred profit sharing plan at the time the taxpayer received those amounts, and

    • (ii) the amount or value of any funds or property appropriated to or for the benefit of the taxpayer in the year that, by virtue of subsection 147(13), would have been so included if the revoked plan had been a deferred profit sharing plan at the time of the appropriation of the funds or property; and

  • (e) the revoked plan shall be deemed, for the purposes of this Act, not to be an employees profit sharing plan or a retirement compensation arrangement.

• Marginal note:Payments out of profits

  (16) Where the terms of an arrangement under which an employer makes payments to a trustee specifically provide that the payments shall be made “out of profits”, the arrangement shall be deemed, for the purpose of subsection 147(1), to be an arrangement for payments “computed by reference to an employer’s profits from the employer’s business”.

• Interpretation of other beneficiary

  (17) Where the expression “employee or other beneficiary” under a profit sharing plan occurs in this section, the words other beneficiary shall be construed as meaning any person, other than the employee, to whom any amount is or may become payable by a trustee under the plan as a result of payments made to the trustee under the plan in trust for the benefit of employees, including the employee.

• Marginal note:Inadequate consideration on purchase from or sale to trust

  (18) Where a trust governed by a deferred profit sharing plan or revoked plan

  • (a) disposes of property to a taxpayer for a consideration less than the fair market value of the property at the time of the transaction, or for no consideration, or

  • (b) acquires property from a taxpayer for a consideration greater than the fair market value of the property at the time of the transaction,

  the difference between that fair market value and the consideration, if any,

  • (c) shall, for the purposes of subsections 147(10) and 147(15), be deemed to be an amount received by the taxpayer at the time of the disposal or acquisition, as the case may be, from a trustee under the plan as if the taxpayer were a beneficiary under the plan, and

  • (d) is an amount taxable under section 201 for the calendar year in which the trust disposes of or acquires the property, as the case may be.

• Marginal note:Transfer to RPP, RRSP or DPSP

  (19) An amount is transferred from a deferred profit sharing plan in accordance with this subsection if the amount

  • (a) is not part of a series of periodic payments;

  • (b) is transferred on behalf of an individual

    • (i) who is an employee or former employee of an employer who participated in the plan on the employee’s behalf, or

    • (ii) who is a spouse or common-law partner, or former spouse or common-law partner, of an employee or former employee referred to in subparagraph (i) and who is entitled to the amount

      • (A) as a consequence of the death of the employee or former employee, or

      • (B) under a decree, an order or a judgment of a competent tribunal, or under a written agreement, that relates to a division of property between the employee or former employee and the individual in settlement of rights that arise out of, or on a breakdown of, their marriage or common-law partnership;

    in full or partial satisfaction of the individual’s entitlement to benefits under the plan;

  • (c) would, if it were paid directly to the individual, be included under subsection 147(10) in computing the individual’s income for a taxation year; and

  • (d) is transferred for the benefit of the individual directly to

    • (i) a registered pension plan,

    • (ii) a registered retirement savings plan under which the individual is the annuitant (within the meaning assigned by subsection 146(1)),

    • (iii) a deferred profit sharing plan that can reasonably be expected to have at least 5 beneficiaries at all times throughout the calendar year in which the transfer is made,

    • (iv) a registered retirement income fund under which the individual is the annuitant (within the meaning assigned by subsection 146.3(1)), or

    • (v) a licensed annuities provider to acquire an advanced life deferred annuity, if the individual is an employee or former employee of an employer who participated in the plan on the employee’s behalf.

• Marginal note:Taxation of amount transferred

  (20) Where an amount is transferred on behalf of an individual in accordance with subsection 147(19),

  • (a) the amount shall not, by reason only of that transfer, be included by virtue of this section in computing the income of any taxpayer; and

  • (b) no deduction may be made under any provision of this Act in respect of the amount in computing the income of any taxpayer.

• Marginal note:Restriction re transfers

  (21) A deferred profit sharing plan becomes a revocable plan at any time that an amount is transferred from the plan to a registered pension plan, a registered retirement savings plan or another deferred profit sharing plan unless

  • (a) the transfer is in accordance with subsection 147(19); or

  • (b) the amount is deductible under paragraph 60(j) or 60(j.2) of this Act or paragraph 60(k) of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, by the individual on whose behalf the transfer is made.

• Marginal note:Excess transfer

  (22) Where

  • (a) the transfer of an amount from a deferred profit sharing plan in a calendar year on behalf of a beneficiary under the plan would, but for this subsection, be in accordance with subsection 147(19), and

  • (b) the requirements of subsection 147(5.1) in respect of the plan are not satisfied for the year by reason that the beneficiary’s pension credits or pension adjustments do not comply with any of paragraphs 147(5.1)(a) to 147(5.1)(c),

  such portion of the amount transferred as may reasonably be considered to derive from amounts allocated or reallocated to the beneficiary in the year or from earnings reasonably attributable to those amounts shall, except to the extent otherwise expressly provided in writing by the Minister, be deemed to be an amount that was not transferred in accordance with subsection 147(19).