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 an option to acquire listed shares of a public company be an RRSP qualified Investment?
Position TAKEN:
Yes
Reasons FOR POSITION TAKEN:
4900(1)(e) states that rights to acquire a qualified property would be qualified property, these shares would be qualified under either (d) of 204 definition or 4900(1)(b).
951838
XXXXXXXXXX M.P. Sarazin
Attention: XXXXXXXXXX
July 18, 1995
Dear Sirs:
Re: Options and Qualified Investments for an RRSP
This is in reply to your facsimile of July 13, 1995 wherein you requested our comments as to whether an option to acquire shares of listed public company would be a qualified investment, within the meaning assigned by subsection 146(1) of the Income Tax Act (the "Act"), for a trust governed by a registered retirement savings plan ("RRSP"). In addition, you have requested our comments regarding a transfer of an option where, under its terms, it is non-transferable.
Investments that qualify under subsection 146(1) of the Act include investments described in any of (a), (b), (d) and (f) to (h) of the definition "qualified investment" in section 204 of the Act and investments prescribed in section 4900 of the Income Tax Regulations (the "Regulations").
Under the provisions of paragraph 4900(1)(e) of the Regulations, an option is a qualified investment if the option gives the owner the right to acquire either immediately or in the future property all of which is a qualified investment for the plan trust. Shares of a public corporation are qualified investments in accordance with paragraph 4900(1)(b) of the Regulations while shares listed on a prescribed stock exchange in Canada are qualified investments pursuant to paragraph (d) of the definition of "qualified investment" in section 204 of the Act. Consequently, an option to acquire either type of shares would be an RRSP qualified investment.
Generally, it is the terms of an option that will define the rights that a transferee would receive as a result of the transfer of the particular option. Even though the transferability of an option may be relevant for valuation purposes, such transferability is irrelevant for purposes of satisfying the definition in 4900(1)(e) of the Regulations. In any case, we do not express opinions on the fair market value of investments.
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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