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.
Peter K. Noack (613)957-8963
XXXX
January 8, 1988
Dear Sir:
We reply to your letter of November 17 concerning the application of paragraphs (a) and (b) of the definition of "qualifying active business" in subsection 5100(1) of the Regulations to the business of a real estate development corporation.
We agree that, generally speaking, a real estate development corporation whose business is the development of land, the sale of lots and the provision of services would carry on a "qualifying active business" as long as the earning of real estate rentals is not its principal business and the corporation meets all the other requirements in the definition of "qualifying active business".
You are concerned about a situation where shares that qualified as investments for an RRSP under paragraph 4900(6)(a) of the Regulations subsequently fail to meet the requirements for an "eligible corporation", because substantially all of the property of the corporation is no longer used in a "qualifying active business" as defined in subsection 5100(1) of the Regulations. In such a case the RRSP trust will be subject to the special tax imposed under subsection 207.1(1) of the Income Tax Act.
The above opinion is our best interpretation of the law as it applies generally but, as stated in paragraph 24 of Information Circular 70-6R, is not binding on the Department.
Yours truly,
for Director Financial Industries Division Rulings Directorate
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