24 April 1996 External T.I. 9531635 - FOREIGN CONTENT IN MUTUAL FUNDS

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:

Foreign content in a mutual fund and what constitutes property

Position:

Gave general comments on what constitutes property and in particular property in a mutual fund for purposes of foreign property as it is a question of fact, and the issue in question has not been looked at extensively in the past

Reasons:

Would need more information on the particular items in letter to adequately answer question, it is not possible to give general all encompassing answer.

XXXXXXXXXX 5-953163

Attention: XXXXXXXXXX

April 24, 1996

Dear Sirs:

Re: Foreign Content

This is in reply to your letter of November 22, 1995 in which you request a technical interpretation on how foreign content is defined in a mutual fund and the definition of property with respect to foreign property. We apologize for the delay in responding to your enquiry.

The situation described in your letter is an actual fact situation and written confirmation of the tax implications inherent in proposed transactions are given by this Directorate only where the transactions are the subject of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R2. Where a completed transaction is involved, the enquiry should be addressed to relevant District Tax Services Office. However, we can offer the following general comments.

To measure the amount of property in a plan, the Act uses each property's "cost amount" which is a defined term in the Income Tax Act (the "Act") and in general refers to a property's cost for tax purposes at a particular time. Pursuant to subsection 248(1) of the Act "property" is defined as "property of any kind whatever whether real or personal or corporeal or incorporeal and, without restricting the generality of the foregoing, includes

(a)a right of any kind whatever, a share or a chose in action,

(b) unless a contrary intention is evident, money,

(c) a timber resource property, and

(d) the work in progress of a business that is a profession

In order to properly determine whether or not the above definition of property encompasses the items noted in your letter, we would need to look at each individual item, all agreements relating to the item and the relationship of the items to any other property in the fund to make a proper determination of whether the item is considered to be property and then whether or not the property would be foreign property for purposes of the Act.

We regret that we could not be of further assistance.

Yours truly,

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