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:
Whether debenture convertible into share is a warrant or right to acquire a share.
Position TAKEN:
No.
Reasons FOR POSITION TAKEN:
Debenture is a debenture, not a warrant or right to acquire a share.
XXXXXXXXXX 942630
Attention: XXXXXXXXXX
October 24, 1994
Dear Sirs:
Re: Convertible Debentures as Qualified Investments
This is in reply to your letter of October 5, 1994, in which you ask whether debentures of a corporation described in paragraph 4900(12)(a) of the Income Tax Regulations (the "Regulations") are qualified investments for a registered retirement savings plan (RRSP).
Although shares of a corporation described in either paragraph 4900(6)(a) or paragraph 4900(12)(a) of the Regulations are qualified investments in accordance with paragraph (d) of the definition of "qualified investment" in subsection 146(1) of the Income Tax Act, debt of such corporations are not.
You note that paragraph 4900(1)(e) of the Regulations provides that a warrant or right to acquire a qualified investment is itself a qualified investment. In the context of the rules respecting qualified investments for an RRSP, however, a debenture which is convertible to a qualified investment cannot simply be characterized as a warrant or right to acquire the qualified investment.
Although the foregoing comments are an expression of opinion only and therefore not binding on the Department, we trust they are helpful.
Yours truly,
for Director
Financial Industries Division
Rulings Directorate
Policy and Legislation Branch
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