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:
Will a share be a qualified investment if it meets 4900(12) but does not meet 4900(6)?
Position:
Yes
Reasons:
A share will qualify if it satisfies either provision.
980240
XXXXXXXXXX M.P. Sarazin
Attention: XXXXXXXXXX
February 5, 1998
Dear Sirs:
Re: Qualified Investment for a Registered
Retirement Savings Plan ("RRSP")
This is in reply to your letter dated January 30, 1998, wherein you requested our views in respect of the application of subsections 4900(6) and (12) of the Income Tax Regulations (the "Regulations").
You are of the view that subsection 4900(6) conflicts with subsection 4900(12) and you ask whether a share will be a qualified investment if it qualifies under subsection 4900(12) but does not qualify under subsection 4900(6) of the Regulations.
The preamble to subsection 4900(6) of the Regulations states that a property that meets the conditions described therein will be a qualified investment for a trust governed by an RRSP. The preamble to subsection 4900(12) of the Regulations also states that a property that meets the conditions described therein will be a qualified investment for a trust governed by an RRSP. Consequently, where a property meets the conditions described in either of subsections 4900(6) or (12) then the property will be a qualified investment for a trust governed by an RRSP.
In the Technical Notes issued by the Department of Finance in respect of the introduction of subsection 4900(12) of the Regulations, it was noted that "the designated shareholder definition generally does not facilitate the control of a corporation by groups of unrelated employees". It is apparent that subsection 4900(12) was introduced to allow small business corporation shares that would not qualify under subsection 4900(6) of the Regulations to qualify under subsection 4900(12). In our view, there is no conflict between the two provisions.
We note that the determination of whether a particular property would satisfy the conditions in subsection 4900(6) or in subsection 4900(12) is a question of fact that could only be determined when all of the facts are known.
While we hope our comments are of assistance to you, they do not constitute an advance income tax ruling and therefore are not binding on the Department in respect of a specific situation.
Yours truly,
for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
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