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:
Is a share that is listed on Tier 3 of the TSX Venture Exchange a qualified investment for an RRSP?
Position:
It is not qualified by virtue of the listing on Tier 3, however, it may qualify under another provision of the Act or Regulations.
Reasons:
Tier 3 is not a prescribed exchange pursuant to section 3200 of the Regulations.
XXXXXXXXXX 2002-014632
P. Kohnen
October 11, 2002
Dear XXXXXXXXXX:
Re: Request for technical interpretation - Self-directed RRSP account
This is in reply to your verbal enquiry of May 10, 2002, which has been forwarded to our Directorate for response, and further to our telephone conversation (XXXXXXXXXX/Kohnen) of September 16, 2002, wherein you requested our views with respect to why a specific investment would not constitute a qualified investment for a registered retirement savings plan ("RRSP").
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 advanced income tax ruling request. 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.
The types of property that constitute qualified investments for RRSPs are described in the definition of "qualified investment" in subsection 146(1) of the Income Tax Act (the "Act"). Paragraph (a) of that definition includes certain of the investments listed in the definition of "qualified investment" in section 204 of the Act. Pursuant to paragraph (d) of the definition in section 204, a share listed on a prescribed stock exchange in Canada is a qualified investment for an RRSP.
Section 3200 of the Income Tax Regulations (the "Regulations") lists the stock exchanges in Canada that are prescribed for purposes of the Act. In the Backgrounder released with the Department of Finance News Release No. 2000-101, dated December 21, 2000, the Department of Finance announced their intention to add Tiers 1 and 2 of the Canadian Venture Exchange to the list of prescribed exchanges in Canada. The Canadian Venture Exchange has since changed its name to the TSX Venture Exchange.
It should be noted that the TSX Venture Exchange operates an additional tier, Tier 3, to accommodate the transfer of stocks from the Canadian Dealing Network, Canada's over-the-counter market. It is not currently proposed that Tier 3 of the TSX Venture Exchange be added to the list of prescribed stock exchanges in Canada. Accordingly, a share which is listed on Tier 3 of the TSX Venture Exchange will not, solely by virtue of its listing, be a qualified investment for an RRSP. We note that your enquiry relates to shares of XXXXXXXXXX, which are traded on Tier 3 of the TSX Venture Exchange.
A share that is listed on Tier 3 of the TSX Venture Exchange may be a qualified investment for an RRSP by virtue of another provision in the Act or Regulations. For example, if the share in question is also listed on another exchange in Canada, which is one of the exchanges prescribed pursuant to section 3200 of the Regulations, the share will be a qualified investment. Similarly, a share will also be a qualified investment if it is listed on one of the exchanges outside of Canada that are prescribed by section 3201 of the Regulations.
A share of a corporation whose status is that of a "public corporation", as defined in subsection 89(1) of the Act, by reason of the corporation having complied with all the conditions prescribed by subsection 4800(1) of the Regulations and having either elected in prescribed manner or been designated by the Minister to be a public corporation, will also be a qualified investment, even though it is not listed on a prescribed stock exchange.
Pursuant to paragraph 4900(6)(a) of the Regulations, a share of an "eligible corporation", as defined in subsection 5100(1) of the Regulations, will be a qualified investment for an RRSP (subject to paragraph 4900(8)), if no annuitant nor beneficiary under the plan is a "designated shareholder", as defined in subsection 4901(2) of the Regulations, of the eligible corporation. Similarly, under paragraph 4900(12)(a), a share of a corporation that at the time of acquisition by the RRSP, or at the end of the last taxation year of the corporation ending before that time, was a small business corporation, will be a qualified investment for the RRSP, if no annuitant nor beneficiary under the plan was a "connected shareholder", as defined in subsection 4901(2) of the Regulations, immediately after the shares were acquired by the RRSP.
For more information on qualified investments for RRSPs, you may wish to consult 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).
We trust that the above comments are of assistance.
Yours truly,
Roberta Albert, CA
for Director
Financial Industries Division
Income Tax Rulings Directorate
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