22 February 1994 External T.I. 9403055 - HAA7217-1 COST AMOUNT RRSP PROPERTY

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.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

RULINGS DIRECTORATE
CORRESPONDENCE SUMMARY

DOCUMENT TYPE:

Opinion

Principal Issues:

What is cost amount of property for purposes of subsection 206(2)

Position TAKEN:

Routine reply

Reasons FOR POSITION TAKEN:

Routine application of law

LEGAL:

FINANCE OPINION:

JURISPRUDENCE:

RCT PUBLICATIONS:

HAA NUMBER:7217-1

		5-940305
XXXXXXXXXX	(613) 957-8953 

February 22, 1994

Dear Sir:

Re: Determination of the Cost of Property held in Registered Retirement Savings Plans ("RRSPs")

This is in reply to your letters of February 4 and 14, 1994, concerning the calculation of the "book value" of property held in an RRSP for purposes of the foreign content rules.

As you are aware, the Income Tax Act (the "Act") imposes a limit on how much foreign property can be held in an RRSP and applies a tax to any excess holdings. The limit is generally 20% of the property held in the RRSP but can be greater if certain types of property, referred to as "small business property", are held in the plan.

To measure the amount of property in a plan, the Act uses each property's "cost amount" and limits the RRSP's total foreign holding cost amount to a percentage of the total cost amount of all of the RRSP's holdings. A property's "cost amount" is similar to a property's "book value" for accounting purposes but may not be the same in every case. Cost Amount is a term defined in the Act and in general means a property's cost for tax purposes at a particular time. While there are exceptions, in most cases property held in an RRSP is capital property and its cost amount is defined as its "adjusted cost base" to the RRSP at that time.

The term "adjusted cost base", or "ACB", is also defined in the Act and can change over time. In general, however, the ACB of a capital property is equal to the actual amount laid out to acquire the property plus any brokerage fees or other costs incurred which are incidental to the acquisition. Whether or not these costs include any "front end load" charges is a question of fact which could only be determined after an analysis of those charges is made.

With respect to the recording of cost amounts when an RRSP is transferred from one trustee to another, the Department has stated that the transfer does not constitute a disposition or acquisition of the property held in the trust pursuant to section 146(16) of the Act. (See paragraph 7 of Interpretation Bulletin IT412R enclosed). Accordingly the property must continue to be recorded at its cost amount as determined immediately before the transfer. Please note however that this position does not apply where only a portion of the assets are transferred from one RRSP to another or between RRSPs held by the same trustee.

Your concerns in regard to the remaining issues raised in your letters primarily involve issues of procedure, practical application of the law and questions of fact, and are matters which must be settled between yourself and the trustee(s) of your RRSPs. We can not offer any comments on them at this time. Nevertheless, we hope our comments will be of assistance and lead to a successful settlement of all of these issues to the satisfaction of all concerned.

Yours truly,

for Director
Financial Industries Division
Rulings Directorate