26 November 1997 External T.I. 9726185 - US TREASURY BILLS, QUALIFIED INV

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:

Would a U.S. Treasury Bill qualify as a qualified investment for a RRIF?

Position:

Yes

Reasons:

Qualifies under 4900(o) if given an investment grade by a rating agency.

	                              972618
XXXXXXXXXX		                   M.P. Sarazin

November 26, 1997

Dear Sir:

Re: Self-Directed Registered Retirement Income Fund ("RRIF")

This is in reply to your letter dated September 23, 1997, wherein you requested clarification with respect to U.S. investments that could be held within a self-directed RRIF. In addition, you wanted to know whether the foreign property limit is computed based on the original cost amount or the current fair market value of the property held in the self-directed RRIF.

The kinds of property that may be held in a RRIF are described in the definition of "qualified investment" found in subsection 146.3(1) of the Income Tax Act (the "Act"). Qualified investments include investments described in paragraphs (a), (b), (d) and (f) to (h) of the definition of "qualified investment" in section 204 of the Act, a bond, debenture, note or similar obligation of a corporation the shares of which are listed on a prescribed stock exchange in Canada and investments described in section 4900 of the Income Tax Regulations (the "Regulations").

Under paragraph 4900(1)(p) of the Regulations, a qualified investment includes a bond, debenture, note or similar obligation of a corporation the shares of which are listed on a prescribed stock exchange referred to in section 3201 of the Regulations. The prescribed U.S. stock exchanges are listed in paragraph 3201(o) of the Regulations.

Under paragraph 4900(1)(o) of the Regulations, a qualified investment includes a bond, debenture, note or similar obligation issued by the government of a country other than Canada that had, at the time of purchase, an investment grade rating with a bond rating agency that in the ordinary course of its business rates the debt obligations issued by that particular government. Consequently, a U.S. Treasury Bill or Bond that has an investment grade rating by a bond rating agency at the time that it was acquired will qualify as a qualified investment that could be held by a RRIF.

Subsection 206(2) provides that where, at the end of any month after 1993, the total of the cost amount of foreign property exceeds 20% of the cost amount of all property held at that time, the RRIF trust is subject to a tax of 1% of the lesser of the excess and the total of the cost amounts of all foreign property acquired after June 18, 1971. Cost amount is defined in subsection 248(1) of the Act. Generally, the cost amount of a capital property held by a RRIF equals the adjusted cost base of the particular property and the cost amount of a loan or lending asset is its amortized cost. In this regard, we enclose a copy of Interpretation Bulletin IT-412R2.

We trust the above 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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