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:
are shares subject to a cease trading order qualified investments for an RRSP and if so, at what value?
Position TAKEN:
Yes but value is a question of fact and registration to plan trustee may not be possible.
Reasons FOR POSITION:
General statement of our understanding of exchange rules.
XXXXXXXXXX 5-942185
Attention: XXXXXXXXXX
September 14, 1994
Dear Sirs:
Re: Investments for Registered Retirement Savings Plans ("RRSP")
This is in reply to your letter of August 25, 1994, concerning the valuation and eligibility of securities as qualified investments for RRSPs where the securities are listed on a prescribed stock exchange but are the subject matter of a cease trading order or are flagged as "halted".
When a share of a corporation is listed on a prescribed stock exchange in Canada, the corporation automatically becomes a "public corporation" as defined in the Income Tax Act (the "Act") and will continue to be a public corporation until such time as it is wound up or it is delisted and makes an election not to be a public corporation. As noted in our letter to you dated January 13, 1993, (File 5-923826), the delisting of such a share, the suspension of its trading or the bankruptcy of the corporation will not generally cause a share to become an ineligible investment since shares of most public corporations are also qualified investments for RRSPs.
When a share is not listed on a prescribed stock exchange in Canada but is listed on a prescribed stock exchange outside of Canada, the share will not be a share of a public corporation as defined in the Act. Accordingly, if such a share is delisted it will not generally continue to be RRSP eligible. However, it is our understanding that cease trading orders or halts in trading will not of themselves normally cause the delisting of a share. Such shares should therefore continue to be RRSP eligible until they are actually delisted.
When any investment is acquired by an RRSP in a non-arm's length transaction, its acquisition must be recorded at its fair market value at the time of the acquisition. However, it is a question of fact what that value is in each case and we can not provide you with any general rules on which to base such valuations.
You should also note that any investment acquired by an RRSP must be property of the RRSP and in the case of shares, this generally means that the shares must be registered in the name of the trustee. However, it is our understanding that this may not always be possible when the trading of the shares has been halted or a cease trading order issued. Again this would have to be determined on a case by case basis.
The above comments are based on our understanding of the law as it applies in general and may or may not apply to the circumstances of a particular case. They do not form an advance income tax ruling and they are not binding on the Department.
Yours truly,
for Director
Financial Industries Division
Rulings Directorate
Policy and Legislation Branch
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