22 October 1989 Ministerial Letter 54868 F - Qualified Investments for RRSPs

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.

September 22, 1989

Dear Sirs:

This is in reply to your letter of August 2, 1989 wherein you requested our opinion as to whether the shares of 24(1) would be qualified investments for registered retirement savings plans ("RRSP").

The Department cannot provide assurance that these shares would be qualified investments of an RRSP as this can only be decided on the basis of the facts as determined at the time of acquisition of the shares by a plan.

Generally an RRSP can invest in shares of a corporation if the shares are listed on a prescribed stock exchange in Canada or in a country other than Canada or if the corporation is a "public corporation" as defined in the Income Tax Act (the Act). It should be noted that for purposes of the Act, life insurance corporations are considered to be public corporations.

When the shares of a corporation do not qualify as investments for an RRSP as noted above, they may qualify if they are shares of a Canadian Controlled Private Corporation (CCPC) which is an "eligible corporation" and the annuitant of the RRSP is not a "designated shareholder" of that company. These latter two terms are defined terms and their meanings are provided in sections 4900 through 5103 of the Income Tax Regulations.

In brief, an eligible corporation is generally a taxable Canadian corporation which uses substantially all of its property in a "qualifying active business". Specifically excluded from this definition are securities, dealers, financial institutions, corporations whose principal business is the lending of money or the purchasing of debt, and non-resident controlled corporations.

A "qualifying active business" is also a defined term which generally includes any business which is carried on in Canada except one where its principal purpose is to earn income from the property in the form of interest, dividends, rent, royalties or gains from disposition of property. A qualifying business may, however, include a business of leasing property other than real property, and a retail or wholesale business.

Pursuant to our telephone conversation on September 18, 1989 (Francis/19(1)) you have advised us that the 24(1)   is not a "public corporation" for purposes of the Act.

Since the above-noted corporation will not qualify as an eligible corporation under section 5100 of the Regulations, it is our opinion that the shares will not be qualified investments for RRSPs.

We trust the above comments will be of assistance to you.

Yours truly,

for DirectorFinancial Industries DivisionRulings Directorate