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 election in postamble of definition of "public corporation" has retroactive effect for purposes of RRSP "qualified investment" rules.
Position:
Yes.
Reasons:
Rationale for our position on 132(6) election is equally valid for 89(1) election for public corporation.
961001
XXXXXXXXXX P. Spice
Attention: XXXXXXXXXX
May 2, 1996
Re: Qualified Investment for Registered Retirement Savings Plan ("RRSP")
This is in reply to your letter of March 15, 1996, in which you ask us to reconcile interpretations contained in our letters of May 15, 1995 (#9504295) and December 19, 1990 (#9032605) concerning, respectively, the retroactive effect of elections under subsection 132(6) and (former) paragraph 89(1)(g) of the Income Tax Act (the "Act"). In particular, you ask whether a share of a public corporation is a "qualified investment" for an RRSP where it is acquired at a time when the corporation is not a "public corporation" but in the taxation year of the corporation in which it is deemed to be a public corporation by virtue of an election as described in the postamble to the definition.
In our opinion concerning mutual fund trust units we indicate that a valid election under subsection 132(6) of the Act in respect of a mutual fund trust's first taxation year will cause all units of the mutual fund trust purchased in the particular taxation year, whether before or after the date of the election, to be qualified investments within the definition contained in paragraph 4900(1)(d) of the Income Tax Regulations (the "Regulations").
We have reconsidered the position we stated in our letter of December 19, 1990, and it is now our view the election in subsection 89(1) of the Act which is contained in the postamble of the definition of "public corporation" has a retroactive effect for purposes of the qualified investment rules and, in particular, for purposes of paragraph 4900(1)(b) of the Regulations. If a new corporation becomes a public corporation on or before the time when it must file the T2 return for its first taxation year, an election filed with that return deems the corporation to have been a public corporation since its date of incorporation. Thus, any shares acquired by an RRSP between the date of incorporation and the time at which the corporation becomes a "public corporation" will be qualified investments. 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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