17 June 1993 External T.I. 9316025 F - Foreign Property in RRSP

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.

XXXXXXXXXX

Attention:  XXXXXXXXXX

Dear Sirs:

RE:  Foreign Property Content in a Registered Retirement Savings Plan ("RRSP")

This is in reply to your letter of April 22, 1993 in which you ask three questions concerning the above noted-subject matter. Our answers follow.

1.     The percentage limitation on foreign property is, as you suggest, based on the cost amount of the property. ("Cost amount" is defined in subsection 248(1) of the Income Tax Act and, in the case of stocks - non-depreciable capital property - is the adjusted cost base.) Therefore, fluctuations in market value of the foreign property vis-a-vis the non-foreign property will not subject the RRSP trust to a penalty tax.

2.     The determination of the proportion of foreign property in the RRSP trust is made at the time the RRSP trust acquires the property. The cost of all foreign properties, including those being acquired, is measured against the cost of all properties held in, including those being acquired by, the trust.

3.     A "timeshare" in a U.S. property would be a foreign property subject to section 206 of the Income Tax Act (the "Act"). In addition, such a property may be a "non-qualified investment" for a RRSP within the meaning of paragraph 146(1)(c) of the Act. Where a foreign property is also a non-qualified investment, the foreign property tax under subsection 206(2) of the Act does not apply. Rather, the tax under subsection 146(10) of the Act is exigible, and the fair market value of the non-qualified investment at the time of its acquisition is brought into the income of the RRSP annuitant. When the RRSP trust disposes of the non-qualified investment subsection 146(6) applies to allow a deduction to the annuitant in the year of disposition equal to the lesser of the amount that was included in income under subsection 146(10) and the proceeds of disposition of the property.

Although the foregoing comments are not binding on the Department, we trust they assist.

Yours truly,

for DirectorFinancial Industries DivisionRulings Directorate