19 September 1994 External T.I. 9419305 - RPPS-FOREIGN PROPERTY, CANADIAN CORPORATIONS

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:

When shares listed on a prescribed stock exchange will be foreign property.

Position TAKEN:

When corporation is not a Canadian corporation as defined in 89(1).

Reasons FOR POSITION TAKEN:

Legislation - routine.

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Attention: XXXXXXXXXX

September 19, 1994

Dear Sirs:

This is in reply to your letter of July 27, 1994 in respect of the foreign property rules for pension plans as they may apply to Canadian corporations.

The definition of "foreign property" is set out in subsection 206(1) of the Income Tax Act (Canada) (the "Act"). As you note, foreign property includes a share of the capital stock of a corporation other than a Canadian corporation pursuant to paragraph (d) of the definition (note not paragraph (a) as in your letter), and "Canadian corporation" is defined in subsection 89(1) of the Act. The requirement of residency in subsection 89(1) may be met pursuant to the deeming rules in subsection 250(4) of the Act or through meeting the criterion that central management or control is exercised in Canada.

Accordingly, if a corporation does not meet the definition of a "Canadian corporation" its shares would be foreign property, notwithstanding that the shares are listed on a prescribed stock exchange in Canada.

Note that a share of a Canadian corporation may also be foreign property pursuant to paragraph 206(1)(d.1) of that definition if the corporation's shares may reasonably be considered to derive their value, directly or indirectly, primarily from portfolio investments in foreign property. (However, this provision generally does not apply to a share of a class listed on a prescribed stock exchange in Canada where no shares of that class have been issued after December 4, 1985.)

The foregoing comments are an expression of opinion only and are not binding on the Department. We trust, however, that they are useful.

Yours truly,

for Director
Financial Industries Division
Rulings Directorate
Policy and Legislation Branch