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: Will shares of a Canadian company (or options to acquire such shares) be foreign property because its shares trade on a U.S. stock exchange?
Position: No.
Reasons: Where the shares or options are traded will not affect whether the shares or options are foreign property for purposes of the Act.
XXXXXXXXXX 2000-003831
M.P. Sarazin
August 25, 2000
Dear Sir:
Re: Canadian Corporation and Foreign Property
This is in response to your letter of May 29, 2000, requesting our views as to whether an option (to acquire a share of a Canadian corporation) acquired on a stock exchange in the United States would be a "foreign property" within the meaning assigned by subsection 206(1) of the Income Tax Act (the "Act"). For purposes of this discussion we will assume that the stock exchange is prescribed under section 3201 of the Income Tax Regulations (the "Regulations") and that therefore the option would be a qualified investment in accordance with paragraph 4900(1)(e) of the Regulations and paragraph (h) of the definition of "qualified investment" in section 204 of the Act.
The Canada Customs and Revenue Agency's (the "Agency") general views regarding foreign property held in registered plans are found in Interpretation Bulletin IT-412R2 (Foreign Property of Registered Plans). (Interpretation bulletins are available at your local tax services office or on the internet at www.ccra-adrc.gc.ca/formspubs/menu-e.html).
An option to acquire a foreign property is likewise a foreign property as provided in paragraph (h) of the definition of "foreign property" in subsection 206(1) of the Act.
Whether a share of any particular corporation is a foreign property (as defined in the Act) at any particular time is a question of fact. A share of a Canadian corporation would not be a foreign property unless the share can reasonably be considered to derive its value primarily from foreign property. We note that where the conditions in subsection 206(1.1) of the Act are satisfied, a corporation that derives its value primarily from foreign property will be exempted from being foreign property for purposes of the Act.
The location of the particular prescribed stock exchange used to acquire a share will not affect whether the share is or is not a foreign property for purposes of the Act. Consequently, a share of Canadian corporation that does not derive its value primarily from foreign property will not be considered foreign property because it is acquired on a foreign prescribed stock exchange. This same principle would apply to an option to acquire a share of a corporation.
We trust that the above comments will be of assistance.
Yours truly,
Patricia Spice
for Director
Financial Industries Division
Income Tax Rulings Directorate
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