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: Is a share of a cooperative corporation ("co-op") a qualified investment for an RRSP?
Position: Question of fact. It could be if at the time of acquisition it is a qualifying share in respect of a specified cooperative corporation and other requirements are met.
Reasons: Provided for in paragraph 4900(12)(c).
XXXXXXXXXX 2002-011885
P. Kohnen
January 28, 2002
Dear XXXXXXXXXX:
Re: Request for technical interpretation - RRSP investment in co-op shares
This is in reply to your e-mail of January 17, 2002 to Ron Ryan of the Client Services Directorate, wherein you requested our views with respect to whether securities that are not publicly traded, such as co-ops, are eligible for registered retirement savings plans ("RRSPs"). Your request has been forwarded to our directorate for response.
Written confirmation of the tax implications inherent in particular transactions are given by this Directorate only where the transactions are proposed and are the subject matter of an advanced income tax ruling request. Where the particular transactions are completed, the enquiry should be addressed to the relevant Tax Services Office. However, we are prepared to provide the following general comments, which may be of assistance.
The term "security", as used in your e-mail, is not defined in the Income Tax Act (the "Act"). However, Black's Law Dictionary defines the term as including:
Any note, stock, treasury stock, bond, debenture, evidence of indebtedness, certificate of interest ... etc. For the purpose of our response, and given your reference to a security that is not publicly traded, it is assumed that your question refers to shares of a cooperative corporation.
The kinds of property that constitute qualified investments for an RRSP are described in subsection 146(1) of the Act and section 4900 of the Income Tax Regulations (the "Regulations").
Under the provisions of paragraph 4900(12)(c) of the Regulations, a share which was, at the time of acquisition, a qualifying share in respect of a specified cooperative corporation and the RRSP which acquires it, will be a qualified investment at any time if immediately after its acquisition by the RRSP, no annuitant, beneficiary or subscriber under the RRSP was a connected shareholder of the corporation. The expressions "connected shareholder", "qualifying share" and "specified cooperative corporation" are defined in subsection 4901(2) of the Regulations.
A "connected shareholder" generally means a person (other than an exempt person) who owns directly or indirectly not less than 10% of the issued shares of any class of the specified co-op (or a related corporation). For the purpose of this definition, subsection 4901(2.1) of the Regulations deems a share of the capital of a specified cooperative corporation to represent shares of a class of capital stock of the corporation where each share of the capital of the corporation and all other shares of the capital of the corporation have attributes that are identical.
A "qualifying share" means a share of the capital or capital stock of the specified cooperative corporation where
a) ownership of the share is not a condition of membership in the corporation, or
b) a person who is an annuitant, a beneficiary or a subscriber under the plan or fund (or any other person related to that person) has not received a payment from the corporation after November 29, 1994 pursuant to an allocation in proportion to patronage in respect of consumer goods or services, and can reasonably be expected not to receive a payment, after the acquisition of the share by the trust governed by the plan, from the corporation pursuant to an allocation in proportion to patronage in respect of consumer goods or services.
Where either of the above conditions is satisfied, the shares of the specified cooperative corporation would be a qualified investment.
A "specified cooperative corporation" means a cooperative corporation within the meaning assigned by subsection 136(2) of the Act or a corporation that would be a cooperative corporation within the meaning assigned by subsection 136(2) of the Act if the purpose described in that subsection were the purpose of providing employment to the corporation's members or customers.
We trust that the above comments are of assistance.
Yours truly,
Roberta Albert, C.A.
for Director
Financial Industries Division
Income Tax Rulings Directorate
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