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: Are investment certificates issued by an incorporated charitable organization qualified investments for an RRSP?
Position: No.
Reasons: A debt of the corporation does not satisfy any of the investments described in the definition if "qualified investment" in subsection 146(1) of the Act or section 4900 of the Regulations.
XXXXXXXXXX 2000-000877
M. P. Sarazin
Attention: XXXXXXXXXX
April 3, 2000
Dear Sirs:
Re: Investment Certificates as Qualified Investments for RRSPs
This is in response to your letter dated February 18, 2000, wherein you requested our views as to whether investment certificates issued by an incorporated charitable organization to fund an expansion of its building would be a qualified investment within the meaning assigned by subsection 146(1) of the Income Tax Act (the "Act").
In your letter you have outlined what is an actual fact situation related to proposed transactions. As noted in Information Circular 70-6R3 (available at your local tax services office or on the internet at www.ccra-adrc.gc.ca/formspubs/menu-e.html), this directorate can only provide an opinion concerning the tax consequences associated with specific proposed transactions in the form of an advance income tax ruling. Consequently, we can only provide you with the following general comments.
The kinds of property that constitute qualified investments for a registered retirement savings plan ("RRSP") are described in subsection 146(1) of the Act and section 4900 of the Income Tax Regulations (the "Regulations"). The determination of whether an investment certificate is a qualified investment is a question of fact.
Debts issued by the following entities would qualify as qualified investments:
(a) a debt issued by a Canadian corporation (other than a corporation with share capital or a corporation that does not deal at arm's length with a person who is an annuitant, a beneficiary or an employer under the governing plan of the plan trust) if
(i) the taxable income of the corporation is exempt from tax under Part I of the Act because of paragraph 149(1)(l) of the Act (a club, society or association that, in the opinion of the Minister, was not a charity within the meaning assigned by subsection 149.1(1) of the Act that meets certain conditions); and
(ii) either the debt is issued by the corporation as part of an issue of debt by the corporation for an amount of at least $25 million or, at the time of the acquisition of the debt by the plan trust, the corporation had issued debt as part of a single issue for an amount of at least $25 million.
(b) bonds, debentures, notes or similar obligations of a corporation the shares of which are listed on a prescribed stock exchange in Canada (prescribed stock exchanges in Canada are listed in section 3200 of the Regulations);
(c) bonds, debentures, notes, mortgages or similar obligations
(i) of or guaranteed by the Government of Canada;
(ii) of the government of a province or an agent thereof;
(iii) of a municipality in Canada or a municipal or public body performing a function of government in Canada;
(iv) of a corporation, commission or association not less than 90% of the shares or capital of which is owned by Her Majesty in right of a province or by a Canadian municipality, or of a subsidiary wholly-owned corporation that is a subsidiary to such corporation, commission or association;
(v) of an education institution or a hospital if repayment of the principal amount thereof and payment of the interest thereon is to be made, guaranteed, assured or otherwise specifically provided for or secured by the government of a province;
(d) a bond, debenture, note or similar obligation of a public corporation other than a mortgage investment corporation;
(e) a bond, debenture, note or similar obligation issued by a mutual fund trust the units of which are listed on a prescribed stock exchange in Canada;
(f) a bond, debenture, note or similar obligation issued by a credit union that meets certain conditions described in paragraph 4900(1)(g) of the Regulations;
(g) a bond, debenture, note or similar obligation issued by a cooperative corporation that meets certain conditions described in paragraph 4900(1)(h) of the Regulations;
(h) a bond, debenture, note or similar obligation issued by a Canadian corporation that meets certain conditions described in paragraph 4900(1)(i) of the Regulations;
(i) a bond, debenture, note or similar obligation issued or guaranteed by a certain Development Banks listed in paragraph 4900(1)(l) of the Regulations;
(j) a bond, debenture, note or similar obligation issued by a government of a country other than Canada that had, at the time of purchase, an investment rating with a bond rating agency that in the ordinary course of its business rates the debt obligations issued by that government; or
(k) bonds, debentures, notes or similar obligations of a corporation the shares of which are listed on a prescribed stock exchange outside of Canada (prescribed stock exchanges outside of Canada are listed in section 3201 of the Regulations).
We also note that a mortgage or an interest in a mortgage would be a qualified investment for an RRSP under paragraph 4900(1)(j) or subsection 4900(4) of the Regulations. The Canada Customs and Revenue Agency's general views with respect to mortgages and the conditions that have to be satisfied in order for the interest in the mortgage to be a qualified investment are found in paragraph 9 of Interpretation Bulletin IT-320R2 which is also available at the above noted internet site.
We trust these comments will be of assistance.
Yours truly,
P. Spice
for Director
Financial Industries Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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