20 April 2000 External T.I. 2000-0011475 - SHARES OF US CORP QUALIFIED FOR RRSP

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 shares of a particular corporation qualified investments for an RRSP?

Position: We can't provide an opinion.

Reasons: Must be submitted as an advance ruling request; or if not a proposed transaction, would be a question of fact to be determined by the TSO.

XXXXXXXXXX 2000-001147
S. E. Thomson
April 20, 2000

Dear XXXXXXXXXX:

Re: Eligibility of XXXXXXXXXX Shares for RRSP

This is in reply to your letter of February 25, 2000 in which you ask for a ruling on whether or not the above mentioned shares are eligible to be held in your registered retirement savings plan ("RRSP"). You imply that the shares are traded "over-the-counter", and that the company is a U.S. corporation.

We are unable to definitively reply to such queries except where we have had the opportunity of reviewing all the facts and related documentation. Such a review is conducted by the relevant tax services office where the query relates to an ongoing or completed transaction. For proposed transactions, we are able to reply only in the context of an advance income tax ruling as set out in Information Circular 70-6R3 Advance Income Tax Rulings, available at www.ccra-adrc.gc.ca, or from your local tax services office. However, we are able to offer the following general comments on the relevant provision of the Income Tax Act, which may apply. Please note that these comments are general in nature, and may or may not apply in your situation. As such, the comments are not binding on the Canada Customs and Revenue Agency.

By virtue of the definition of "qualified investment" in paragraph 146(1)(a) and section 204 of the Income Tax Act (the "Act"), a share of a U.S. corporation will be a qualified investment for purposes of an RRSP if it is listed on a prescribed stock exchange. Stock exchanges prescribed for these purposes are listed in section 3200 and 3201 of the Income Tax Regulations (the "Regulations"), but do not include the "over-the-counter" facilities of the stock exchanges.

However, where a share is not listed on a prescribed stock exchange, the share may still be a qualified investment under Act and the Regulations, although these generally will be shares of Canadian corporations. Please see IT-320R2 Registered Retirement Savings Plans - Qualified Investments for the kinds of property that qualify as investments or an RRSP trust.

Where an RRSP trust acquires a non-qualified investment, the fair market value of the investment will be included in the income of the annuitant of the RRSP pursuant to subsection 146(10) of the Act. When the RRSP trust disposes of the non-qualified investment, the annuitant may be entitled to a deduction under subsection 146(6) of the Act.

Although a share of a U.S. corporation will be a "foreign property" as defined in subsection 206(1) of the Act, where the share is not a qualified investment the Part XI tax on excess foreign property held in an RRSP will not apply. That is because where the value of foreign property has been included in the income of the annuitant because it is not a qualified investment for an RRSP as explained above, its cost is excluded from the total cost of foreign property under subparagraph 206(2)(a)(ii) of the Act for purposes of determining if the RRSP holds excessive foreign property.

We trust that we have been of some assistance.

Yours truly,

P. Spice
for Director
Financial Industries Division
Income Tax Rulings Directorate