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:
Would an interest in a unit investment trust known as the Standard & Poor's Depositary Receipt be a qualified investment for an RRSP?
Position TAKEN:
Question of Fact
Reasons FOR POSITION TAKEN:
If it is an interest in a trust then No, however, if it is the same as an American Depositary Receipt then yes.
951013
XXXXXXXXXX M.P. Sarazin
Attention: XXXXXXXXXX
June 23, 1995
Dear Sirs:
Re: Registered Retirement Savings Plan Qualified Investment
This is in reply to your letter dated April 5, 1995 wherein you requested a determination of whether or not an interest in a unit investment trust known as the Standard & Poor's Depositary Receipt ("SPDR") would be a qualified investment, within the meaning assigned by subsection 146(1) of the Act, for a trust governed by a registered retirement savings plan ("RRSP").
As indicated in paragraph 21 of Information Circular 70-6R2, a copy of which is enclosed, a ruling can only be provided by this Directorate where a proposed acquisition of an investment by an RRSP is the subject matter of an advance ruling request submitted in the manner set out in the Circular.
While you may, if you so desire, request an advance ruling, we must note that the eligibility of an interest in a unit investment trust as a qualified investment for an RRSP is a question of fact which, generally, may only be determined at the time of its acquisition by an RRSP. Accordingly, a ruling can only be provided beforehand if it can be shown that the interest will be qualified at the time of acquisition.
While we are unable to provide you with written confirmation regarding the SPDR units described in your letter, we are able to provide you with general comments, that follow below, which may or may not be applicable to the circumstances of your particular situation.
"Qualified investment" for the purposes of an RRSP has the meaning assigned by subsection 146(1) of the Income Tax Act (the "Act"). Investments that qualify under subsection 146(1) include investments described in any of (a), (b), (d) and (f) to (h) of the definition "qualified investment" in section 204 of the Act and investments prescribed in section 4900 of the Income Tax Regulations.
Generally an RRSP can invest in shares of a corporation if the shares are listed on a prescribed stock exchange in Canada or in a country other than Canada. It is our understanding that an American Depositary Receipt ("ADR") is a certificate of a depositary (bank, trust company, etc.) certifying that it holds for the account of the named person the number and class of shares specified in the ADR, and that such person is entitled on presentation of the ADR to take delivery of the shares. In this situation ownership of the ADR represents ownership of the underlying shares, provided that the relationship between the RRSP and the depositary does not constitute a trust.
In the situation where the Depositary Receipt represents a unit of beneficial interest in a non-resident trust, the Depositary Receipt would be a non-qualified investment. However, an RRSP may invest in units of a mutual fund trust which is defined in subsection 132(6) of the Act. A mutual fund trust resident in the United States cannot satisfy the definition in subsection 132(6) since the trust has to be a unit trust (within the meaning assigned by subsection 108(2) of the Act) resident in Canada.
We have also enclosed a copy of Interpretation Bulletin IT-320R2 Registered Retirement Savings Plans - Qualified Investments. In particular, paragraph 11 of IT-320R2 refers to interests in trusts that would qualify as an investment for an RRSP.
We regret that our comments could not be more favourable.
Yours truly,
for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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