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: Whether the same person having shares in their own name, in a RRSP under their own name, and in a TFSA under their own name counts as 3 shareholders for the purposes of the MIC definition in 130.1(6)?
Position: Subject to 104(2), yes. However the prohibited investment tax and advantage tax rules may apply to investments and earnings in the RRSP and the TFSA.
Reasons: 130.1(6); 207.01(1) "advantage" and "prohibited investment"
XXXXXXXXXX
2011-040316
Sylvie Danis
(613) 957-3496
March 29, 2012
Dear XXXXXXXXXX :
Re: Interpretation of the term "Shareholders" in reference to Mortgage Investment Corporations
This is in response to your memo dated April 7, 2011, wherein you requested our comments with respect to the definition of the term "shareholders" as it relates to the definition of Mortgage Investment Corporation ("MIC") in the Income Tax Act (the "Act").
In particular, you have asked us to confirm that the same person having shares in their own name, in a registered retirement savings plan ("RRSP") under their own name, and in a tax free savings account ("TFSA") under their own name counts as 3 shareholders for the purposes of the MIC definition.
To qualify as a MIC for the purposes of the Act, a corporation must, throughout the taxation year, satisfy the criteria in subsection 130.1(6) of the Act, which includes a minimum number of shareholders.
In our view, an individual and their RRSP and TFSA trusts would generally each count as one shareholder for the purposes of paragraph 130.1(6)(d) of the Act. However, consideration should be given to whether subsection 104(2) of the Act could apply to deem multiple trusts to be a single trust. Subsection 104(2) provides that where there is more than one trust and all of the property of the various trusts has been received from one person and the income from these trusts accrues to the same beneficiary or group or class of beneficiaries, such of the trustees as the Minister may designate shall be deemed to be in respect of all the trusts an individual whose property is the property of all the trusts and whose income is the income of all of the trusts.
We note that the prohibited investment tax and advantage tax rules may apply to investments and earnings in the RRSP and the TFSA. Please refer to the attached copy of document 2010-0369031E5 and the amendments to Part XI.01 of the Act that were recently enacted as part of Bill C-13 for further details.
We trust the above comments are of assistance. However, as stated in paragraph 22 of Information Circular 70-6R5, the above comments do not constitute an income tax ruling and accordingly are not binding on the Canada Revenue Agency in respect of any particular situation.
Yours truly,
Jenie Leigh
for Director
Financial Industries Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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