13 April 2000 External T.I. 2000-0013845 - INVESTMENT CONTRACTS AS QUALIFIED INVESTMENTS

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: Does debt of a registered charity (represented by investment certificates) qualify as an investment for an RRSP?

Position: No

Reasons: Does not meet the requirements of any of the provisions in subsection 146(1) or section 4900.

XXXXXXXXXX 2000-001384
S. E. Thomson
Attention: XXXXXXXXXX

April 13, 2000

Dear XXXXXXXXXX:

Re: Jubilee Fund RRSP Eligibility

This is in reply to your letter of March 3, 2000 in which you ask for a written opinion on whether or not debt instruments issued in the form of investment certificates by an incorporated charitable organization are qualified investments for purposes of a registered retirement savings plan ("RRSP").

The Canada Customs and Revenue Agency (the "CCRA") does not provide written responses to such queries except in the context of an advance ruling request as set out in Information Circular IC 70-R3 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 comments on the relevant provision of the Income Tax Act (the "Act") which may apply. Since these comments are general in nature, and may or may not apply in your situation, these comments are not binding on the CCRA.

Investments that are qualified for purposes of an RRSP are set out in subsection 146(1) and section 204 of the Act, and section 4900 of the Income Tax Regulations (the "Regulations"). Generally, debt of a registered charity is not likely to be a qualified investment under these provisions.

Debts issued by the following entities would qualify as qualified investments:

(a) 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);

(b) 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;

(c) guaranteed investment certificates issued by a trust company incorporated under the laws of Canada or 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 where the debt is guaranteed by a corporation or mutual fund trust that is listed on a prescribed stock exchange in Canada; or where the corporation is controlled by a corporation and / or mutual fund trust that is listed on a prescribed stock exchange in Canada; or where the corporation has issued at least $10 million bonds, debentures, notes or similar obligation, and meets certain other requirements as described in paragraph 4900(1)(i) of the Regulations;

(i) a security of a Canadian corporation issued pursuant to certain community development acts and guaranteed by Her Majesty in right of a province, as set out in paragraph 4900(1)(i.1) of the Regulations;

(j) indebtedness of a Canadian corporation (other than 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 trust) represented by a bankers' acceptance;

(k) a mortgage in respect of real property situated in Canada as set out in paragraph 4900(1)(j) or subsection 4900(4) of the Regulations;

(l) a bond, debenture, note or similar obligation issued or guaranteed by a certain international development banks listed in paragraph 4900(1)(l) of the Regulations;

(m) 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;

(n) 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);

(o) 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 (i.e., a club, society or association that meets certain conditions and that, in the opinion of the Minister, was not a charity within the meaning assigned by subsection 149.1(1) of the Act); 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; or

(p) debt of a corporation as described in (o)(i) above, and the corporation has acquired or plans to acquire property from Her Majesty in right of Canada or a province for a total consideration of not less than $25 million, and that meets certain other requirements as set out in paragraph 4900(1)(q) of the Regulations.

We trust that the above information will be of some assistance.

Yours truly,

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