29 July 1997 External T.I. 9717835 - RRSP PROPERTY LOSSES

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:

What can be done when an RRSP subscribes for shares and they are not received?
		What are the tax consequences? 

Position:

What can be done in such circumstances is a question of law not covered by the Act.
			In similar situations we have allowed any restitution received to be returned to the RRSP.

Reasons:

No provisions in the Act specifically address such circumstances. Return of restitution has been previously granted in various cases.

XXXXXXXXXX 971783

Attention: XXXXXXXXXX

July 29, 1997

Dear Sirs:

Re: RRSP Property Losses

This is in reply to your letter of July 3, 1997, in which you requested a ruling with respect to a specific situation resulting from an RRSP trust's subscription for shares of a company and the failure of that company to issue the shares.

Confirmation of the tax consequences of specific situations can not be provided by this Directorate in the form of an advance income tax ruling where the situation involves completed or substantially completed transactions. You may however provide the details of such situations to your local Tax Services Office for their consideration and comment.

While we can not provide any comments with respect to your specific situation, we can provide the following general information.

The Income Tax Act (the "Act") does not set any specific limits with respect to the length of time permitted to complete an acquisition of property by an RRSP. In any situation where an unusually long period of time has elapsed or completion of a transaction is frustrated, it may be prudent for the RRSP trust to obtain legal counsel with respect to the matter.

Where restitution of funds can be obtained as the result of any actions taken by the annuitant of the RRSP or the RRSP trustee, the Department has previously taken a position that the trust may be replenished with funds received as a result of the action. In such circumstances an advance income tax ruling can be obtained to confirm the tax consequences of replacing the funds. The Department's published Advance Tax Ruling ATR-24, available from your local Tax Services Office, outlines one such ruling provided previously. Please note however, that this position would not allow an annuitant to contribute additional funds to an RRSP, to replace any lost funds, without any tax implications.

An RRSP does not have to be deregistered because it has incurred a loss as a result of its normal commercial practices. Furthermore, in these circumstances, we would not generally consider a right to receive an amount of restitution a non-qualified investment for an RRSP.

We trust these comments will be of assistance to you.

Yours truly,

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