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.
Dear Sirs:
Re: Qualified Investments
Foreign currency and U.S. Treasury Bills
This is in reply to your letter of June 11, 1991 asking if foreign currency and U.S. Treasury Bills are prescribed investments for a trust that is a registered investment under paragraph 204.4(2)(b) or (d) of the Income Tax Act (the "Act").
For the purposes of paragraphs 204.4(b) and (d) and subsection 204.6(1) of the Act, subsection 4901(1) of the Income Tax Regulations states that a prescribed investment for a trust means a property that is a qualified investment for the plan or fund in respect of which the trust is registered. Such plan or fund would be one described in subsection 204.4(1) of the Act; i.e., a registered retirement savings plan ("RRSP"), a registered retirement income fund ("RRIF") or a deferred profit sharing plan ("DPSP"). With this in mind, we offer the following comments on your specific queries.
Foreign Currency
As stated in paragraph 6 of Interpretation Bulletin IT-320R, foreign currency is not a qualified investment for an RRSP. Since the relevant provision of the Act (i.e., subparagraph 204(e)(i)) applies also to RRIFs and DPSPs, foreign currency is also not a qualified investment for RRIFs and DPSPs. Accordingly, where a trust that is a registered investment under paragraph 204.4(2)(b) or (d) of the Act holds foreign currency at the end of a particular month, it will be subject to the 1% Part X.2 tax set out in subsection 204.6(1) of the Act.
Foreign currency is not a qualified investment regardless of whether it is situated inside or outside Canada. The fact that paragraph 3(e) of IT-412R states that foreign currency situated in Canada is not foreign property does not therefore, as you seem to suggest in your letter, mean that such foreign currency is a qualified investment.
U.S. Treasury Bills
U.S. Treasury Bills are not described in paragraphs 146(1)(g), 146.3(1)(d) or 204(e) of the Act, or section 4900 of the Regulations, and are therefore not qualified investments for RRSPs, RRIFs or DPSPs. Accordingly, as stated above with respect to foreign currency, where a trust that is a registered investment under paragraph 204.4(2)(b) or (d) of the Act holds U.S. Treasury Bills at the end of a particular month, it will be subject to the 1% Part X.2 tax set out in subsection 204.6(1) of the Act.
By virtue of paragraph 206(1)(g) of the Act, U.S. Treasury Bills are foreign property. Accordingly, where a trust that is a registered investment under paragraph 204.4(2)(b) or (d) of the Act holds such Bills at the end of a particular month, it would also be subject to the 1% Part X1 tax set out in subsection 206(2) of the Act if the cost amount of all its foreign property at the end of that month exceeds 10% of the cost amount of all its property at that time.
Proposed legislation contained in Bill C-18, given first reading in May 1991, will increase the above-mentioned 10% to 12% for months in 1990, 14% for months in 1991, 16% for months in 1992, 18% for months in 1993 and 20% for months in 1994.
We trust our comments are of assistance.
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© Sa Majesté la Reine du Chef du Canada, 1991
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