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.
Principal Issues: Will shares of a non-resident corporation that was delisted from the TSX Venture Exchange but are listed on the NASDAQ OTC Bulletin Board be a qualified investment for an RRSP?
Position: Most likely no but it will be a question of fact.
Reasons: The corporation would not be a public corporation and the shares are not listed on a prescribed stock exchange.
XXXXXXXXXX 2004-010550
P. Kohnen, CMA
December 15, 2004
Dear XXXXXXXXXX:
Re: Technical Interpretation - Delisted Shares in an RRSP
This is in response to your e-mail submission of November 29, 2004 and our subsequent telephone conversation (XXXXXXXXXX/Kohnen) of December 10, 2004 in which you requested our comments with respect to whether shares held in your registered retirement savings plan ("RRSP"), which are no longer listed on the TSX Venture Exchange but are listed on the NASDAQ OTC Bulletin Board, would constitute a qualified 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. 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.
As was noted during our conversation, it will be a question of fact whether a particular property is a qualified investment at a particular time. Given the diversity of financial products in the marketplace, and the fact that the attributes of many such products change over time, the Canada Revenue Agency does not maintain a list of qualified investments for RRSPs and other tax-deferred plans.
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. Pursuant to paragraph (h) of the definition in section 204, a share listed on a prescribed stock exchange in a country other than Canada is also 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. Section 3201 of the Regulations lists prescribed stock exchanges outside of Canada. It should be noted that the National Association of Securities Dealers Automated Quotation System (NASDAQ) Over-the-Counter (OTC) Bulletin Board facility is not a prescribed stock exchange for the purpose of section 3201 of the Regulations. Similarly, Tier 3 of the TSX Venture Exchange, an over-the-counter market, is not a prescribed Canadian stock exchange for the purpose of section 3200 of the Regulations.
Pursuant to paragraph 4900(1)(b) of the Regulations, a share of the capital stock of a public corporation other than a mortgage investment corporation will be a qualified investment for an RRSP. In accordance with the definition of "public corporation" in subsection 89(1) of the Act, any corporation that was a public corporation after June 18, 1971, because it was resident in Canada and its shares were listed on a prescribed exchange in Canada, will continue to be a public corporation even if its shares cease to be so listed, as long as the corporation continues to be resident in Canada, the corporation has not elected not to be a public corporation (in accordance with subparagraph (c)(i) of the definition of public corporation) and the Canada Revenue Agency has not notified the corporation that is has been designated not to be a public corporation. However, based on the comments in your submission and expressed during our telephone conversation, it would appear that the corporation in question has never been resident in Canada and thus would not be a public corporation and would not qualify under paragraph 4900(1)(b) of the Regulations.
It is not apparent from the information provided why your financial institution has advised that the shares became a non-qualified investment on XXXXXXXXXX, given your statement that the shares were delisted from the TSX Venture Exchange effective XXXXXXXXXX.
We trust that the above comments will be of assistance to you. Please do not hesitate to contact Mr. Phil Kohnen at (613) 957-2093 should you require further information.
Yours truly,
Roberta Albert, CA
for Director
Financial Industries Division
Income Tax Rulings Directorate
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