18 January 1988 Income Tax Severed Letter 5-5051 - [Instalment Receipt]

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.

Revenue Canada Taxation Head Office

January 18, 1988

R. Nanner (613)957-3494

Dear Sirs:

Re: Instalment Receipts

This is in reply to your letter of November 6, 1987 wherein you made further representations in response to our letter of October 26, 1987 to you. Upon further review of the matter we have concluded that the instalment receipts in question represent the ownership of the underlying shares.

Consequently these receipts would be considered a qualified investment pursuant to paragraph 4900(l)(b) of the Income Tax Regulations. However, we would caution that the difference between the purchase price of the share and of the instalment receipt would be considered a debt of the purchaser. Consequently, subsections 146(4) and 146.3(3) of the Income Tax Act (the "Act") may respectively apply if the purchaser is a registered retirement savings plan (RRSP) or a registered retirement income fund (RRIF).

It is also our opinion that in the above situation the underlying share would be considered as being used as a security for a loan and, as such, subsections 146(10), 146.3(7) and 198(1) of the Act would respectively apply to a purchaser who is an RRSP, a RRIF or a deferred profit sharing plan.

We hope these comments are of assistance to you.

Yours truly,

for Director Financial Industries Division Rulings Directorate