7 January 2011 External T.I. 2010-0355281E5 - Qualified Investments for RRSP- Public Corporation

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.

Principal Issues: Whether the views expressed in documents 9610015 and 9733475 continue to be the position of the CRA with respect to the retroactive effect of the election in the post-amble of the definition "public corporation" for the purposes of the RRSP "qualified investment" rules.

Position: Yes.

Reasons: See 9610015 and 9733475.

XXXXXXXXXX
									2010-035528
									Jason R. Ward
									(613) 957-9769

January 7, 2011

Dear XXXXXXXXXX :

Re: Qualified Investment for Registered Retirement Savings Plan ("RRSP")

This is in reply to your letter of January 15, 2010 in which you asked whether the views expressed in technical interpretations 9610015 and 9733475 continue to be the position of the Canada Revenue Agency (the "CRA"). These documents confirmed that a share of a corporation, other than a mortgage investment corporation, will retroactively be deemed to be a qualified investment from the time it was acquired by an RRSP trust where:

• at the time the RRSP trust acquired the share, the corporation was not a "public corporation" as defined in subsection 89(1) of the Income Tax Act (the "Act");
• the corporation subsequently became a public corporation on or before its filing due-date for its first taxation year; and
• in accordance with post-amble of the definition "public corporation", the corporation elected in its return of income for its first taxation year to be deemed to have been a public corporation from the beginning of the year until the time it became a public corporation.

Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings, dated May 17, 2002. Where the particular transactions are completed, the inquiry should be addressed to the relevant tax services office. We are, however, prepared to offer the following general comments, which may be of assistance.

We confirm that the views expressed in technical interpretations 9610015 and 9733475 continue to reflect the position of the CRA and that these views apply equally to debt obligations of a public corporation.

More specifically, it remains our view that the election in the post-amble of the definition "public corporation" in subsection 89(1) of the Act has a retroactive effect for the purposes of the qualified investment rules and, in particular, for the purposes of paragraphs 4900(1)(b) and 4900(1)(c.1) of the Income Tax Regulations. If a new corporation becomes a public corporation on or before the time when it must file its return of income for its first taxation year, and files an election with that return deeming the corporation to have been a public corporation since its date of incorporation, any shares or debt obligations of the corporation acquired by an RRSP between the date of incorporation and the time at which the corporation becomes a public corporation will be qualified investments from the time they are so acquired. Accordingly, any taxes that would otherwise apply to an RRSP trust, or the plan annuitant, by virtue of the RRSP trust acquiring or holding such a corporation's non-qualifying shares or debt obligations during the relevant period would be rendered inapplicable by the filing of the valid election.

We trust that these comments will be of assistance.

Yours truly,

Mary Pat Baldwin, CA
for Director
Financial Sector and Exempt Entities Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch