23 February 1994 External T.I. 9402255 - HAA2255-7 RRSP INVESTMENTS PUBLIC CORPORATIONS

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.

RULINGS DIRECTORATE
CORRESPONDENCE SUMMARY

DOCUMENT TYPE:

Opinion

Principal Issues:

1.How can corporation prove its a public corporation
2.Who is responsible for proving what share FMV is

Position TAKEN:

1.Corp can get letter of confirmation from DO
2.FMV is a fact not something one person has to determine independently

Reasons FOR POSITION TAKEN:

Both routine replies

LEGAL:

FINANCE OPINION:

JURISPRUDENCE:

RCT PUBLICATIONS:

HAA NUMBER: 7255-7

XXXXXXXXXX		5-940225

Attention: XXXXXXXXXX

February 23, 1994

Dear Sirs:

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

This is in reply to your facsimile dated January 31, 1994 concerning the eligibility of certain shares as qualified investments for an RRSP.

Except for certain specific exceptions, shares of the capital stock of public corporations, as defined in paragraph 89(1)(g) of the Income Tax Act (the "Act"), are qualified investments for an RRSP pursuant to Paragraph 4900(1)(b) of the Income Tax Regulations (the "Regulations"). Unfortunately, confirmation of a public corporation's status can not generally be provided by this Department to the public at large. However, a corporation can itself obtain verification of its status through the District Office at which it files its returns and it is our understanding that many RRSP trustees will accept such confirmations as evidence of a corporation's status.

A ruling could also be provided by this office on the eligibility of shares as qualified investments when they are being acquired by a particular RRSP at a particular time. However, the eligibility of shares of a particular corporation as qualified investments for an RRSP is a question of fact which may only be determined at the time of their acquisition by an RRSP. Accordingly, a ruling can only be provided before hand if it can be shown that the shares will be qualified at the time of acquisition.

The fair market value of the shares of any corporation is also a question of fact. Generally, it is the Department's view, as expressed by the Department in its response to question 53 at the 1981 Revenue Canada Round Table, that the fair market value of property is the value available in an open and unrestricted market between informed prudent parties, acting at arm's length and under no compulsion to act, expressed in terms of money or money's worth. Accordingly, it is not the responsibility of any one party to a transaction to determine what that fair market value is.

If a non-qualified investment is acquired by an RRSP trust, subsection 146(10) will apply to include the fair market value of the property in the income for the year of the RRSP annuitant. Subsection 146(10.1) will also apply to the trust and taxes will be exigible with respect to any taxable income earned by the trust in respect of the non qualified investment. If a qualified property is acquired by an RRSP at some value other then its fair market value, subsection 146(9) may also have application to increase the taxable income of the annuitant.

The above comments are an expression of opinion only and do not bind the Department. We trust, however, that they will be of assistance to you.

Yours truly,

for Director
Financial Industries Division
Rulings Directorate