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.
Principal Issues:
Mutual fund units as qualified investments for RRSPs
Position TAKEN:
na
Reasons FOR POSITION TAKEN:
n/a
XXXXXXXXXX 5-940923
Attention: XXXXXXXXXX
June 24, 1994
Dear Sirs:
Re: Mutual Fund Units as Qualified Investments for RRSPs
This is in response to your letter of April 12, 1994, regarding the criteria needed for units of a mutual fund to be a qualified investment for trusts governed by registered retirement savings plans ("RRSPs").
Paragraph 146(1)(g) of the Income Tax Act ("Act") describes the investments that are qualified for an RRSP, and it also makes reference to investments in paragraph 204(e) of the Act and section 4900 of the Income Tax Regulations ("Regulations"). The Act also defines two types of mutual funds, a mutual fund corporation and a mutual fund trust, each of which are qualified investments for an RRSP.
Mutual Fund Corporations
Subsection 131(8) of the Act defines a mutual fund corporation as either a prescribed labour-sponsored venture capital corporation or a corporation meeting the criteria in paragraphs 131(8)(a), (b) and (c) of the Act. One of the criteria in paragraph 131(8)(a) of the Act requires the corporation to be a public corporation, as defined in paragraph 89(1)(g) of the Act. A share of a public corporation is a qualified investment for an RRSP pursuant to paragraph 4900(1)(b) of the Regulations. Any corporation that is a mutual fund corporation pursuant to the criteria in paragraphs 131(8)(a), (b) and (c) of the Act will also be a public corporation and, therefore, its shares will be qualified investments for RRSPs.
A prescribed labour-sponsored venture capital corporation is defined in Regulation 6701. Any corporation described in Regulation 6701 will also be included in the definition of prescribed venture capital corporation as defined in Regulation 6700. A prescribed venture capital corporation is an eligible corporation pursuant to subsection 5100(1) of the Regulations and a share of an eligible corporation is a qualified investment for an RRSP pursuant to subsection 4900(6) of the Regulations.
Mutual Fund Trusts
A mutual fund trust is defined in subsection 132(6) of the Act. Paragraph 132(a) of the Act requires it to be a unit trust which is defined in subsection 108(2) of the Act. Paragraph 132(6)(c) of the Act requires it to meet prescribed conditions relating to the number of its unit holders, dispersal of ownership of its units and public trading of its units. These prescribed conditions are in Regulations 4801 and 4803 of the Act.
If a trust meets the criteria for a mutual fund trust, as defined in the Act, a unit of such a trust is a qualified investment for an RRSP pursuant to paragraph 4900(1)(d) of the Regulations.
We have enclosed copies of the above provisions for your use. If you have further questions, please feel free to contact us again.
Yours truly,
for Director,
Financial Industries Division
Rulings Directorate
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