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 a particular bond be considered a qualified investment for purposes of the rules governing registered retirement savings plans (RRSP) under the Income Tax Act?
Position: Yes
Reasons: Wording of the legislation - the particular bond meets the requirements as provided in the definition of "qualified investment" in section 146(1) and section 204 of the Act.
XXXXXXXXXX 2006-021766
XXXXXXXXXX, 2006
Dear XXXXXXXXXX:
Re: Advance Income Tax Ruling
XXXXXXXXXX
This is in reply to your letter received by us on XXXXXXXXXX, in which you requested an advance income tax ruling on behalf of the above-named taxpayer. We also acknowledge the information provided during our subsequent telephone conversations (XXXXXXXXXX).
We understand that, to the best of your knowledge and that of the taxpayer, none of the issues involved in the ruling request is:
(i) in an earlier return of the taxpayer or a related person,
(ii) being considered by a tax services office or taxation centre in connection with a previously filed tax return of the taxpayer or a related person,
(iii) under objection by the taxpayer or a related person,
(iv) before the courts, or
(v) the subject of a ruling previously issued by the Directorate to the taxpayer or a related person.
Unless otherwise stated, all references to a statute are to the Income Tax Act (Canada), R.S.C. 1985, c.1 (5th Supp.), as amended to the date of this letter, (the "Act"), and all terms and conditions used herein that are defined in the Act have the meaning given in such definition unless otherwise indicated.
Our understanding of the facts, proposed transactions and the purpose of the proposed transactions is as follows:
FACTS
1. XXXXXXXXXX.
2. XXXXXXXXXX.
3. XXXXXXXXXX.
4. The Subsidiary's business address is XXXXXXXXXX and it deals with the XXXXXXXXXX Tax Services Office and the XXXXXXXXXX Tax Centre.
5. The objects of the Subsidiary are to conduct and perform research and development studies, surveys and explorations in the fields of XXXXXXXXXX.
PROPOSED TRANSACTIONS
6. The Subsidiary is proposing to issue "XXXXXXXXXX" (the "Bonds") to residents of XXXXXXXXXX, to raise additional capital for XXXXXXXXXX.
7. The Bonds will be issued by the XXXXXXXXXX (the "Trustee"), on behalf of the Subsidiary.
8. The Bonds will have a fixed interest rate of XXXXXXXXXX% per annum, interest to be paid annually, or compounded and paid to the bondholder at maturity. The Bonds will be available in denominations of $XXXXXXXXXX with a minimum purchase value of $XXXXXXXXXX and an annual maximum purchase value by any person of $XXXXXXXXXX.
9. XXXXXXXXXX.
10. The Bonds will be marketed continuously for a XXXXXXXXXX-year term, ending XXXXXXXXXX. The Bonds will be issued monthly XXXXXXXXXX by the Trustee, having a maturity date of XXXXXXXXXX years from the date of issuance. The Subsidiary reserves the right to terminate the timing of the issuance giving at least XXXXXXXXXX hours notice to the Trustee; however, the Bonds are non-transferable and not redeemable prior to maturity, except in the event of death or financial hardship.
11. The Bonds will be marketed to persons resident in XXXXXXXXXX, and subject to a favourable advance income tax ruling by the Canada Revenue Agency, the Bonds will also be marketed as an eligible investment for a registered retirement savings plan ("RRSP").
PURPOSE OF THE PROPOSED TRANSACTIONS
12. The purpose of the proposed transactions are to provide the Subsidiary with a source of funding to allow it to continue to pursue XXXXXXXXXX. The ability of an individual XXXXXXXXXX resident to purchase these Bonds using funds in their RRSP increases the overall marketability of the Bonds.
RULING GIVEN
Provided that the preceding statements constitute a complete and accurate disclosure of all of the relevant facts, proposed transactions and purpose of the proposed transactions, and provided further that the proposed transactions are carried out as described above, we rule as follows:
Pursuant to paragraph (a) and (b) of the definition "qualified investment" in subsection 146(1) and section 204 of the Act, respectively, and subclause 212(1)(b)(ii)(C)(iv) of the Act, the Bonds will be qualified investments for an RRSP.
The above advance income tax ruling, which is based on the Act and Income Tax Regulations in their present form and does not take into account any proposed amendments thereto, is given subject to the general limitations and qualifications set out in Information Circular 70-6R5 Advance Income Tax Rulings, dated May 17, 2002, and is binding on the Canada Revenue Agency provided that the proposed transactions are completed by XXXXXXXXXX.
Yours truly,
XXXXXXXXXX
Director
Financial Sector and Exempt Entities Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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© Her Majesty the Queen in Right of Canada, 2006
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© Sa Majesté la Reine du Chef du Canada, 2006
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