23 January 1998 External T.I. E9733475 - TIMING OF ELECTIONS

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:

Can an election to be a public corporation have effect from an earlier point in time than its time of filing such that shares of the corporation will be qualified investments for an RRSP at that earlier point in time?

Position: No.

Reasons:

The effective timing of the election is clearly set out in the law.

973347
XXXXXXXXXX W.C. Harding

Attention: XXXXXXXXXX

January 23, 1998

Dear Sirs:

Re: Qualified Investments for an RRSP and RRIF

This is in reply to your letter of December 15, 1997, further to our letter of November 26, 1997.

Subsection 4900(1)(b) of the Income Tax Regulations (the "Regulations") provides that a share of the capital stock of a corporation will be a qualified investment at a particular time if at that time the share is a share of the capital stock of a public corporation other than a mortgage investment corporation. Accordingly, if a share is not a share of a public corporation at the particular time it is acquired by an RRSP or a RRIF it can not be a qualified investment for the plan trust under that provision at that particular time.

Subsection 89(1) of the Income Tax Act (the "Act") defines a public corporation for purposes of the Act. Basically, it provides that a corporation is a public corporation if it is resident in Canada at a particular time and it has had shares of its capital stock listed on a prescribed stock exchange, it has elected to be a public corporation or it has been designated as a public corporation, and it has not subsequently ceased to be a public corporation.

With respect to elections to be a public corporation, except as noted below, subparagraph (b)(i) of the definition specifically provides (among other things) that a corporation will only be a public corporation at a particular time if it has made an election to be a public corporation after June 18, 1971 and before the particular time. Accordingly, subject to the comments below, it would not be possible for the Department to accept that a corporation is a public corporation at any time prior to its filing of an election.

As noted above, the definition of a public corporation provides an exception to the above rules. The post-amble to the definition provides (in general terms) that if a corporation has become a public corporation at a particular time after 1971 then on or before the day it is required to file its return of income for its first year, it may also file another election with that return which will deem the corporation to be a public corporation from the commencement of that year. Accordingly, a corporation may, in these cases, be a public corporation prior to the date on which it elects to be one and also be a qualified investment for an RRSP at an earlier date. Shares of a corporation may also be qualified investments for an RRSP or a RRIF prior to the corporation becoming a public corporation, in accordance with the provisions of subsection 4900(12) of the Regulations.

We trust our comments will be of assistance.

Yours truly,
for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch