26 September 1995 External T.I. 9522895 - SHARES OF DELISTED PUB CO REMAIN ELIGIBLE

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:

Can an RRSP trust continue to hold the shares of public company that has issued a Notice of Bankruptcy?

Position TAKEN:

Yes

Reasons FOR POSITION TAKEN:

Shares retain their status as a qualified investment until such time that the corporation is wound up or it elects not to be a public corporation.

			952289
XXXXXXXXXX		M.P. Sarazin

Attention: XXXXXXXXXX

September 26, 1995

Dear Sirs:

Re: Subsection 207.1(1) of the Income Tax Act (the "Act")

This is in reply to your letter dated August 28, 1995 wherein you requested our comments regarding the status of a share of a public corporation held by a registered retirement savings plan ("RRSP") trust when the public corporation issues a Notice of Bankruptcy and the Canadian Depository for Securities removes all of the corporation's share positions from its participants holdings.

The determination of whether a share of a public corporation that has issued a Notice of Bankruptcy would continue to be a qualified investment within the meaning assigned by subsection 146(1) of the Act can only be determined after a review of all of the relevant facts pertaining to each particular situation.

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 Act, and it would continue to be a public corporation until such time as it is wound up or it makes an election not to be a public corporation. Until that time, the shares of most public corporations will continue to be qualified investments for an RRSP trust. The delisting of a share, the suspension of its trading or the bankruptcy of a corporation will not generally cause a share to become a non-qualified investment.

As noted above, a share of a corporation that is not cancelled by the corporation will generally continue to exist until the corporation is legally wound up. Therefore, until that time, a share of a corporation need not be removed from the records of an RRSP and must be valued at its "adjusted cost base" and/or cost amount to the RRSP until such time as it is disposed of by the RRSP.

In the case where an RRSP trust disposes of shares of a bankrupt public corporation and it reacquires the shares subsequent to such disposition, the reacquisition of the shares will be at the fair market value of the shares on the reacquisition date and the cost amount of the shares to the RRSP will be the fair market value on the reacquisition date.

We trust the above comments will be of assistance to you.

Yours truly,

for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch