17 September 1992 Income Tax Severed Letter 9220595 - Instalment Receipts

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.

922059
J.P. Dunn
(613) 957-2747
24(1)

Attention: 19(1)
September 17, 1992

Dear Sirs:
Re: Investment Corporations

We are writing in response to your correspondence of June 23, 1992 wherein you had requested the views of the Department regarding "Instalment Receipts" and, more particularly, whether such instruments which trade on prescribed stock exchanges in Canada qualify as "marketable securities" as that term is used in subparagraph 130(3)(a)(ii) of the Income Tax Act (the "Act") with respect to an "Investment Corporation", as that term is defined in paragraph 130(3)(a) of the Act.

It is our understanding that, in connection with an arrangement to sell shares on an instalment basis, the shares are sold at a predetermined price with a portion of the sale price payable at the time of the sale and the balance to be paid at some future date in one or more instalments.

Document Disclosed Pursuant to The Access To Information Act Document Divulgué en vertu de la loi sur l'accès à l'information

The purchase, and beneficial ownership, of the share is evidenced by the issue, at the time of the initial payment, of an "instalment receipt" to the purchaser which receipt is listed on a stock exchange and may be traded. The share certificates are retained by and registered in the name of either the seller or a trustee to secure the obligation of the purchaser to pay the final instalment or instalments. Under this arrangement, the shares remain as security but may effectively be traded on a stock exchange through the "instalment receipts".

In view of the foregoing, it is our opinion that an "instalment receipt" which trades on a stock exchange would qualify as a "marketable security" as that term is used in subparagraph 130(3)(a)(ii) of the Act.

Although we trust that our comments are of assistance to you, we would caution that they do not constitute an advance income tax ruling and are, therefore, not binding on the Department in respect of any particular situation.

Yours truly,

for Director
Financial Industries Division
Rulings Directorate
Legislative and Intergovernmental
Affairs Branch

Document Disclosed Pursuant to The Access To Information Act Document Divulgué en vertu de la loi sur l'accès à l'information