18 July 2001 Ministerial Correspondence 2001-0089864 - FOREIGN PROPERTY

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: Are shares of a USA based corporation Canadian property because a Canadian corporation holds substantially all the shares?

Position: No.

Reasons: The ownersship of the shares is not the deciding factor.

Signed on July 18, 2001

XXXXXXXXXX

Dear XXXXXXXXXX:

The Honourable Martin Cauchon, Minister of National Revenue, has asked me to respond to your correspondence of April 11, 2001, concerning the treatment as foreign property of shares held in your registered retirement savings plan (RRSP).

A share of a corporation is generally not a foreign property if the corporation is a Canadian corporation. A Canadian corporation is defined in the Income Tax Act as a corporation that is resident in Canada that was either incorporated in Canada or has been continuously resident in Canada since June 18, 1971.

In most situations, a corporation is considered to be resident in the country in which its central management and control is exercised. Usually this means that the corporation will be resident in the country where its members of the Board of Directors hold their meetings. However, if the Board of Directors does not exercise its powers, and the management and control of the company is actually exercised by some other party, such as the directors of a parent company or a principal shareholder, the company will be resident in the country where the other party is resident.

I understand that you hold shares of XXXXXXXXXX. in your RRSP. From a review of information found on the Internet, it appears that XXXXXXXXXX . was incorporated in the United States and maintains its Head Office in XXXXXXXXXX. However, it also appears that XXXXXXXXXX holds almost XXXXXXXXXX per cent of the company's shares. Accordingly, XXXXXXXXXX would not be a Canadian corporation unless XXXXXXXXXX manages and controls the company from a location in Canada. Based on the information provided to you, this does not appear to be the case. However, you may wish to review this with your advisors.

You are entitled to dispute an income tax assessment should you believe it to be incorrect. To assist you, the Canada Customs and Revenue Agency (CCRA) has published the brochure Your Appeal Rights Under the Income Tax Act, which describes how to file an appeal. A copy of this brochure may be obtained from your local tax services office or through the Internet at www.ccra-adrc.gc.ca/E/pub/tg/p148eq/README.html. However, please note that an appeal of an assessment of tax in respect of excess foreign property held by an RRSP must be filed by the trustee of the RRSP and not by the annuitant.

I trust the information provided is of assistance to you.

							Yours sincerely,

							Bill McCloskey
							Assistant Commissioner
							Policy and Legislation Branch

Wayne Harding
957-9769
July 4, 2001
2001-008986