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 warrants to acquire cash or shares in Canadian public corporations can be foreign property.
Position TAKEN:
Not sure.
Reasons FOR POSITION TAKEN:
Need further information - warrants secured by unconditional guarantee of U.K. parent and are hedged by matching warrants issued by U.K. parent or foreign affiliates. Canadian issuer has no Canadian assets besides the guarantee and matching foreign warrants.
XXXXXXXXXX 950155
Attention: XXXXXXXXXX
April 12, 1995
Dear Sirs:
Re: Definition of Foreign Property
This is in reply to your facsimile transmission of January 19, 1995, in which you ask for our opinion concerning certain warrants to be issued by a Canadian subsidiary of a U.K. parent and whether the warrants would be considered "foreign property" as defined in subsection 206(1) of the Income Tax Act (the "Act"). As discussed in your telephone conversation of February 21, 1995 (XXXXXXXXXX/Stalker), the warrants are to be acquired by registered pension plans and the qualified investment rules are, therefore, not in issue.
Your request appears to relate to a specific proposed transaction. As indicated in Information Circular 70-6R2, we do not express opinions on specific proposed transactions except in the context of an advance income tax ruling. The following comments are, therefore, general in nature and are not binding on the Department.
Generally we would consider a warrant to be an intangible property but not a share or debt instrument; it is a right to acquire another property at a determined price. In the case described by you, the warrant can be exchanged for cash or, under certain circumstances, for shares in Canadian public corporations on a future date.
It is not likely that such warrants will be considered "foreign property" as defined in subsection 206(1) of the Act unless, as you suggest, they can be considered shares or debt obligations of the issuer which derive their value from foreign property in the manner described in paragraph 206(1)(d.1) of the Act. We cannot provide an unequivocal opinion at this time based on the general description you have provided, but may be able to consider it further in the context of a request for an advance income tax ruling.
We trust our comments will be of assistance to you.
Yours truly,
for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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