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: Is an investment club a qualified investment for RRSP purposes if the investment club holds only qualified investments?
Position: We can't say without more details.
Reasons: We will have to know if the investment club is a trust, partnership or corporation.
XXXXXXXXXX 2000-006094
S. E. Thomson
Attention: XXXXXXXXXX
January 9, 2001
Dear XXXXXXXXXX:
Re: Investment Clubs as Qualified Investments
This is in reply to your letter dated December 4, 2000, wherein you enquired as to whether an interest in an "investment club" would be a qualified investment for purposes of a trust governed by a registered retirement savings plan ("RRSP") where the property held by the investment club qualifies as qualified investments.
It appears that the interpretation you seek relates to proposed transactions to be undertaken by a specific taxpayer and, therefore, we bring to your attention Information Circular IC 70-6R3 Advance Income Tax Rulings dated December 30, 1996 issued by Canada Customs and Revenue Agency (CCRA), available on our website www.ccra-adrc.gc.ca. Confirmation of tax consequences with respect to proposed transactions involving specific taxpayers will only be provided in response to a request for an advance income tax ruling. If you wish to obtain an advance income tax ruling with respect to specific transactions which are contemplated, a written request for an advance income tax ruling can be submitted in accordance with the Information Circular. Nevertheless, we can provide you with the following comments.
"Qualified investment" for the purposes of an RRSP has the meaning assigned by subsection 146(1) of the Income Tax Act (the "Act"). Investments that qualify under subsection 146(1) include investments described in any of (a), (b), (d) and (f) to (h) of the definition "qualified investment" in section 204 of the Act and investments prescribed in section 4900 of the Income Tax Regulations (the "Regulations"). Please see Interpretation Bulletin IT-320R2 Registered Retirement Savings Plans - Qualified Investments, also available on our website.
In general, an investment club may take the form of a partnership, trust or corporation and, as such, the determination of whether an interest in a particular club will be a qualified investment can only be determined when it is known in what form the club exists.
If an investment club is a trust, an interest in the trust will be a qualified investment at a particular time only if the trust is
(a) at that time, a mutual fund trust or a small business investment trust; or
(b) a registered investment during the calendar year in which the particular time occurs, or the immediately preceding year.
A "mutual fund trust" is defined in subsection 132(6) of the Act; a "small business investment trust" is defined in subsection 5103(1) of the Regulations; and, a "registered investment" is defined in subsection 204.4(1) of the Act.
If an investment club is a partnership, an interest in a partnership will be a qualified investment if it is a limited partnership unit listed on a prescribed stock exchange in Canada or if it is an interest in a small business investment limited partnership within the meaning assigned by subsection 5102(1) of the Regulations.
A share of the capital stock of an investment club that is a corporation will be acceptable if the share is listed on a stock exchange prescribed by section 3200 or 3201 of the Regulations, or if it qualifies under one of a number of provisions in section 4900 of the Regulations.
In conclusion, the legislation covering qualified investments for RRSPs is complex and its application to your particular situation can not be provided within the scope of this letter. However, should you wish to discuss the law in greater detail as it pertains to your particular club, your local Tax Services Office will be pleased to assist you.
We trust the above comments will be of assistance to you.
Yours truly,
Roberta Albert, CA
for Director
Financial Industries Division
Income Tax Rulings Directorate
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