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.
Principal Issues: 1. Can an RRSP hold $US cash?
2. Can put options be held in an RRSP?
Position: 1. Yes 2. Some.
Reasons: 1. See IT320 paragraph 14.
2. Put options traded on a prescribed stock exchange are now allowed. For other options see IT320 paragraph 22.
XXXXXXXXXX 2005-015853
W. C. Harding
July 20, 2006
Dear XXXXXXXXXX:
Re: Qualified Investments for a Registered Retirement Savings Plan (RRSP)
This is in reply to your facsimile of November 11, 2005 and our subsequent telephone conversation (XXXXXXXXXX - Harding) concerning the ability of a trust governed by an RRSP to hold foreign currency and "put" options as qualified investments.
Interpretation Bulletin IT-320R3, Qualified Investments - Trusts Governed by Registered Retirement Savings Plans, Registered Education Savings Plans and Registered Retirement Income Funds, contains information concerning investments that are qualified investments for an RRSP. The bulletin is available on the CRA Web site at http://www.cra-arc.gc.ca/E/pub/tp/it320r3/.
Foreign Currency
With respect to money and deposits of money, paragraph 14 of IT-320R3 states:
¶ 14. Money and deposits of money may be qualified investments. Money denominated in any currency is a qualified investment except where the money is held for its collectible value, or the fair market value of the money exceeds its stated value as legal tender in its country of issue. A deposit of money is a qualified investment if it is an amount defined to be a deposit by the Canada Deposit Insurance Corporation Act or an amount on deposit with a branch in Canada of a bank (including, after June 27, 1999, a branch in Canada of an authorized foreign bank). Bank and authorized foreign bank have the meanings assigned to those words by section 2 of the Bank Act. Prior to 2003, a deposit also includes an amount on deposit with a bank outside of Canada that is listed in Schedule I or II to the Bank Act.
The legislation pertaining to money and deposits was enacted on June 14, 2001 with application from June 27, 1999.
There is no distinction between "cash" and "money" in the application of this provision.
Put Options
After February 27, 2004, an option (including a "put" option), a warrant or a similar right is a qualified investment for an RRSP if it is listed on a prescribed stock exchange and is in respect of property all of which is a qualified investment for an RRSP.
Prior to February 27, 2004, and, thereafter, if the option is not listed on a prescribed stock exchange, the comments in paragraphs 21 through 23 of IT-320R3 are applicable. As indicated in paragraph 22, a put option is an agreement under which the writer agrees to purchase a property at an agreed upon price should the holder of the option elect to sell the property. Where an RRSP purchases a put option (and the preceding paragraph does not apply), the RRSP will not have acquired a qualified investment since the right the RRSP has acquired is a right to dispose of a property under the terms of the option. On the other hand, where an RRSP trust sells a put option, the RRSP only has an obligation to buy a property under the option at the agreed upon price, should the holder of the put option so require. As the RRSP has not acquired any property, the issue of whether such an option is a qualified investment is not relevant.
In your email you also requested clarification of who can offer RRSPs. CRA does not licence issuers of RRSPs. The definition of a retirement savings plan (RSP) in section 146 of the Income Tax Act (the "Act") includes a description of persons that may issue an RSP. If a person satisfies the conditions described therein, they are entitled to establish and apply for the registration of the plan. A plan will however only be registered if it satisfies the provisions of the Act.
We trust our comments will be of assistance to you.
Yours truly,
Wayne Harding
for Director
Financial Sector and Exempt Entities Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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