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:
An RRSP acquires a share of a mortgage investment corporation that is a qualified investment under paragraph 4900(1)(c) of the Regulations. Is a warrant that is issued with the share, giving the holder a right to acquire another identical share, a qualified investment?
Position: Yes.
Reasons:
Under 4900(1)(e), a right to acquire a qualified investment is also a qualified investment.
XXXXXXXXXX 2000-006225
M. P. Sarazin, CA
February 27, 2001
Dear XXXXXXXXXX:
Re: Warrant as a Qualified Investment
This is in reply to your letter of December 12, 2000, requesting our views regarding your client's acquisition of a unit of a mortgage investment corporation qualifying as a qualified investment for a registered retirement savings plan ("RRSP") and a registered retirement income fund ("RRIF"). Each unit of the mortgage investment corporation consists of a share of the mortgage investment corporation and a warrant giving the holder the right to acquire an identical share of the mortgage investment corporation.
In your letter you have outlined an actual fact situation related to completed transactions. As noted in Information Circular 70-6R4 (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 advance income tax rulings in respect of specific proposed transactions. We must advise you that the review of completed transactions falls within the responsibility of tax services offices. Consequently, we can only provide you with the following general comments.
Paragraph 4900(1)(c) of the Income Tax Regulations (the "Regulations") allows a share of a mortgage investment corporation (as defined in subsection 130.1(6) of the Income Tax Act) to be a qualified investment if the RRSP or RRIF annuitant is not indebted to the corporation.
Paragraph 4900(1)(e) of the Regulations prescribes a warrant or right giving the owner thereof the right to acquire either immediately or in the future property all of which is a qualified investment for the plan trust. We note that paragraph 14 of Interpretation Bulletin IT-320R2 does not reflect the June 23, 1994 amendment to the Regulations removing the requirement, applicable after 1992, that a warrant or right be listed on the Toronto Futures Exchange or on a prescribed stock exchange, within the meaning assigned by section 3200 of the Regulations. Consequently, a warrant to acquire a qualified investment for a RRSP or a RRIF is also a qualified investment whether or not it trades on the Toronto Futures Exchange or on a prescribed stock exchange.
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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