Principal Issues: 1. Interaction between Part XI tax on excess foreign content of an RRSP and Part XI.I tax on non-qualifying investments of an RRSP;
2. Any transitional rules or relief from the application of these two taxes;
3. Transitional relief on non-qualified investments consisting of shares trading on an Over-the-Counter Bulletin Board ("OTC BB").
Position: 1. Part XI imposes a 1% tax at the end of each month on the cost amount of foreign property in excess of 30% of the cost amount of all property of the RRSP; Part XI.1 imposes a 1% tax at the end of each month on the fair market value at the time of acquisition of the property of an RRSP that is not a qualified property.
2. When a property is a foreign, non-qualified investment, only the Part XI.1 tax on the non-qualified investment will apply. There is also a 24-month relief period associated with the foreign content rule.
3. The shares were deemed to be a qualified investment, provided certain conditions are met
Reasons: 1. Sections 205, 206 and 207.1;
2. Subsection 206(2).
3. Paragraph 4900(1)(s) deems securities quoted on the OTC BB, which were acquired by a deferred plan in an arm's length transaction completed before September 1, 2000, to be a qualified investment until December 31, 2001. However, if, after December 31, 2001, the RRSP continued to hold property to which this transitional relief applied, that is, the RRSP did not dispose of the shares, the RRSP holds a non-qualified investment and the RRSP is subject to Part XI.1 tax.