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.
XXXX R. Nanner (613)957-3494
November 1, 1988
Dear XXXX
We are writing in reply to your letter of October 19, 1988 requesting our comments on whether or not a registered retirement savings plan ("RRSP") could purchase securities on credit from its annuitant or from a third party.
It is our view that should an RRSP purchase securities on credit, paragraph 146(4)(a) of the Income Tax Act would apply to the RRSP. As a result, the RRSP would lose its tax-sheltered status for the years during which the debt was outstanding and would pay tax on its taxable income in those years. Furthermore, if it were reasonable to consider that the securities so purchased were permitted by the RRSP to be used as security for the amounts owed by the RRSP, subsection 146(10) of the Income Tax Act would also apply. Consequently, the fair market value of these securities would be included in computing the income for the year of the taxpayer who is the annuitant under the RRSP at that time.
We regret our response could not be more favourable.
Yours truly,
for Director Financial Industries Division Rulings Directorate
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© Her Majesty the Queen in Right of Canada, 1988
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© Sa Majesté la Reine du Chef du Canada, 1988
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