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 CCRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.
Principal Issues:
Are currency and interest rate futures contracts prescribed investments for a registered investment?
Position: Question of Fact.
Reasons:
In order to be a prescribed investment for a registered investment, property must be a qualified investment for an RRSP, a RRIF or a DPSP in respect of which the corporation or trust is seeking registration as a registered investment.
XXXXXXXXXX 2002-013862
G. Allen
June 12, 2002
Dear XXXXXXXXXX:
Re: Registered Investments - Currency and Interest Rate Futures Contracts
This letter is a reply to your letter dated May 8, 2002, wherein you enquired whether currency and interest rates futures contracts would qualify as a prescribed investment for a registered investment.
Written confirmation of the tax implications inherent in particular transactions are given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request. For more information concerning advance tax rulings, please refer to Information Circular 70-6R5 dated May 17, 2002. Copies of information circulars are available at your local Tax Services Office or on the Internet at http://www.ccra-adrc.gc.ca/formspubs/menu-e.html. Where the particular transactions are completed, the enquiry should be addressed to the relevant Tax Services Office. However, we are prepared to provide the following general comments, which may be of assistance.
In general, subsection 204.4(1) of the Income Tax Act (the "Act") defines a registered investment to be a trust or a corporation that has applied in prescribed form and been accepted for registration under subsection 204.4(2) of the Act. A condition for registration under subsection 204.4(2) is that a trust or corporation must only hold prescribed investments. In accordance with subsection 4901(1) of the Income Tax Regulations (the "Regulations"), a property is a prescribed investment for a registered investment, if it is a qualified investment for a plan or fund as described in paragraphs 204.4(1)(a) to (d) of the Act in respect of which the trust or corporation is seeking registration. Paragraphs 204.4(1)(a), (c) and (d) refer to a registered retirement savings plan ("RRSP"), registered retirement income fund ("RRIF") and deferred profit sharing plan ("DPSP"), respectively.
The kinds of property that are qualified investments for an RRSP, RRIF or a DPSP are described in the definitions of "qualified investment" in subsections 146(1), 146.3(1) and section 204 of the Act, respectively. In addition, properties prescribed by section 4900 of the Regulations are also qualified investments. In particular, paragraph 4900(1)(e) of the Regulations states that a warrant or right is a qualified investment for a trust governed by an RRSP, a RRIF, or a DPSP if it gives the owner the right to acquire, either immediately or in the future, property that is a qualified investment. In addition, paragraph 21 of Interpretation Bulletin IT-320R3, entitled "Qualified Investments - Trusts Governed by Registered Retirement Savings Plans, Registered Education Savings Plans and Registered Retirement Income Funds", (available at your local tax services office or on the internet at www.ccra.gc.ca/formspubs/menu-e.html), provides information concerning warrants or rights as qualified investments for RRSPs and RRIFs.
We trust the above comments may be of assistance.
Yours truly,
Roberta Albert, CA
for Director
Financial Industries Division
Income Tax Rulings Directorate
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