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: Shares of a cooperative as a qualified investment in a RRSP.
Position: Refusal to rule.
Reasons: Question of fact and conditions of subsections 4900(12) & (13) of the Regulations.
XXXXXXXXXX 5-990615
Fouad Daaboul
Attention: XXXXXXXXXX
May 3, 1999
Dear Sirs:
Re: Advance Tax Ruling
XXXXXXXXXX
This is in reply to your letter of February 8, 1999, wherein you requested an advance income tax ruling on behalf of the above noted taxpayers to confirm that XXXXXXXXXX are qualified investments for purposes of registered retirement savings plan ("RRSP"). We also acknowledge the information provided during our telephone conversations (XXXXXXXXXX/Daaboul).
Confirmation of the tax implications inherent in an arrangement is given by this Directorate only where the arrangement is the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R3. As stated at subparagraph 15(j) of the circular, an advance income tax ruling will not be issued when a matter on which a determination is requested is primarily one of fact and the circumstances are such that all the pertinent facts cannot be established at the time of the request for the ruling. Further, where the tax status of a particular entity (i.e. as a qualified investment for RRSP purposes) is dependent upon the future activities of that entity, we are not in a position to confirm that that particular entity will always be a qualified investment since we do not know what the future activities of the entity will be. It is our understanding that this information was provided to the taxpayers in September 1997 (our file reference 972268). We offer, however, the following general comments concerning the provisions of the Income Tax Act (“Act”) and Regulations (“Regulations”), in accordance with the above-mentioned Information Circular, which are not binding on the Department.
The term “qualified investment” for an RRSP is defined in subsection 146(1) of the Act. For purposes of paragraph (d) of this definition, paragraph 4900(12)(c) of the Regulations provides that a share of a cooperative may be a qualified investment, provided that such property represents a qualifying share of a specified cooperative corporation and immediately after the acquisition of the property by the RRSP, the annuitant of the RRSP was not a connected shareholder of the cooperative. The expressions "qualifying share", "specified cooperative corporation" and "connected shareholder" are defined in subsection 4901(2) of the Regulations.
The determination as to whether the share of a specified cooperative corporation is a qualified investment under subsection 4900(12) of the Regulations can only be made at the particular point in time at which a particular RRSP trust actually acquires the share. Therefore, the Department will generally not be able to provide any ruling on the ongoing status of such share as a qualified investment. Although a share of a specified cooperative corporation may be a qualified investment pursuant to paragraph 4900(12)(c) of the Regulations, subsection 4900(13) of the Regulations provides that the share will cease to be a qualified investment if:
(i) an individual provides services to or for, acquires goods from, or is provided services by the issuer of the share or a person related to the issuer;
(ii) an amount is received by the RRSP in respect of the share; and
(iii) the amount can reasonably be considered to be
(A) on account of, or in lieu or in satisfaction of, payment for the services to or for the issuer or the person related to the issuer, or
(B) in respect of the acquisition of the goods from, or the services provided by, the issuer or the person related to the issuer.
We trust our comments will be of assistance to you.
Yours truly,
Paul Lynch
for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
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