24 July 1996 External T.I. 9624465 - RRSP RRIF DEPOSITS BONDS

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:

Are specific bonds qualified investments

Position:

No answer provided. Gave general comments

Reasons:

This is quite clearly a proposed transaction.

XXXXXXXXXX							5-962446

Attention: XXXXXXXXXX

July 24, 1996

Dear Sirs:

Re: Bonds as qualified investments for Registered Retirement Savings Plans (RRSPs)

This is in reply to your letter of July 9, 1996, in which you ask if certain bonds described in your letter will be qualified investments for an RRSP or a registered retirement income fund (RRIF).

The situation outlined in your letter relates to an actual proposal to issue the bonds in question. Accordingly, we cannot comment on the income tax consequences that may arise because of their acquisition by an RRSP except as a response to a request for an advance income tax ruling made as outlined in Information Circular 70-6R2, dated September 28, 1990 and the related Special Release thereto. In the alternative, we offer the following general comments that may or may not be applicable to your particular situation.

As noted in your letter, subsection 146(1) of the Income Tax Act (the "Act") provides that qualified investments for a trust governed by an RRSP include bonds, debentures, notes or similar obligations of a corporation the shares of which are listed on a prescribed stock exchange in Canada. Similarly, subsection 146.3(1) provides that bonds, debentures, notes or similar obligations of a corporation the shares of which are listed on a prescribed stock exchange in Canada are also qualified investments for a RRIF. However, the Act does not define what bonds, debentures, notes or similar obligations are and the terms must be given their ordinary meaning. The Act also does not require such properties to be secured in order to be qualified investments.

The Department has previously stated its position concerning situations when a trust governed by an RRSP or RRIF acquires foreign currency in connection with transactions with securities that are denominated in the same foreign currency. While various securities denominated in foreign currency are qualified investments for a trust governed by an RRSP or RRIF, the foreign currency itself is not a qualified investment. Nevertheless, dividends and interest on such securities are often paid in foreign currency and the purchase and sale of these securities are also transacted in foreign currency so the trust may receive or be required to hold foreign currency to participate in these transactions. In such situations, provided that the foreign currency is converted to an otherwise qualified investment within a reasonable time, (for example, one month), the Department will not consider the trust to have acquired a non-qualified investment.

We trust this letter satisfactorily explains our position on this matter.

Yours truly,

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