12 September 1997 External T.I. 9721905 - RRSP FOREIGN CONTENT PENALTY

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:

At what point in time is the calculation of the foreign content limit of a RRSP trust done for purposes of determining when the limit is exceeded?

Position:

The content in the RRSP at the end of the month is the applicable time.

Reasons:

Subsection 206(2) specifically states "at the end of any month"

                                 	9721905
XXXXXXXXXX		                       Franklyn S. Gillman

Attention: XXXXXXXXXX

September 12, 1997

Dear Sirs:

Re: Foreign Content Rules

This is in reply to your letter dated August 13, 1997 wherein you requested clarification as to the proper income tax treatment of the foreign content provisions in the Income Tax Act (the "Act") regarding a trust governed by a registered retirement savings plan.

Subsection 206(2) of the Act applies a tax on a trust governed by a RRSP that holds foreign property in excess of its foreign content limit. Basically the tax is payable where, at the end of the month, the cost amount of foreign property held by the RRSP trust at month-end exceeds the foreign content limit.

For further information concerning the foreign property rules applicable to an RRSP trust, please refer to Interpretation Bulletin IT-412R2.

We trust these comments will be of assistance.

Yours truly,

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