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 a right to acquire a right to acquire a qualified investment is a qualified investment for an RRSP.
Position:
Maybe depending on whether it is a property at all & has any value in the circumstances.
Reasons:
Wording of paragraph 4900(1)(e).
962955
XXXXXXXXXX P. Spice
Attention: XXXXXXXXXX
September 17, 1996
Dear Sirs:
Re: Right to Acquire a Right
This is in reply to your letter of August 26, 1996, in which you ask whether an option to acquire an option is a "qualified investment" as defined in subsection 146(1) of the Income Tax Act (the "Act") for a registered retirement savings plan ("RRSP") trust.
Paragraph 4900(1)((e) of the Income Tax Regulations (the "Regulations") prescribes as a qualified investment for an RRSP trust a right giving the owner thereof the right to acquire either immediately or in the future property all of which is a qualified investment for the RRSP.
In the case you describe an individual holds an option ("First Option) to acquire a share of a corporation which is listed on a prescribed Canadian stock exchange. Such an option would be a qualified investment for an RRSP trust in accordance with paragraph (d) of the definition of "qualified investment" in section 204 of the Act and paragraph 4900(1)(e) of the Regulations. The securities commission has placed trading restrictions on the First Option and the individual cannot dispose of it for six months. The individual therefore intends to sell for proceeds equal to its fair market value an option (the "Second Option") to the individual's RRSP trust which will entitle the RRSP trust to acquire the First Option within one year.
We are unable to determine from the facts you provide whether the Second Option is a property or, if it is indeed a property, that it has any value. We would be pleased to consider this issue in the context of an advance income tax ruling request should a proposed transaction be contemplated.
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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