30 November 1993 External T.I. 5-933214 -
Air Canada v. Min. of Fin. for B.C.,  2 WWR 97 (BCCA)
Certificates of deposit, bearer deposit notes, swap deposit confirmations and bankers' acceptances were held to be "loans and advances to other corporations" rather than "cash on deposit with ... a savings bank" within the meaning of the definition of taxable paid-up capital in the Corporation Tax Act (B.C.). Carrothers, J.A. stated that one must contrast the characteristics of the above bank paper "with the distinctively different characteristics of a cash deposit, which has the attributes of ready availability, use in exchange (orders to pay can be made upon it in the form of a direct order or sometimes a cheque), debtor-creditor relationship in regard to simple debt, and, unlike bank paper, no documentary indicia of the debt other than a ledger or computer entry and perhaps a simple receipt." [C.R.: 212(1)(b)(iii)(D)]
Digital currency and FX contracts excluded
1.12 ... Digital currencies, such as Bitcoins, are not considered to be money issued by a government of a country and are not qualified investments. Foreign exchange contracts do not constitute money and are generally not qualified investments. ...
USD deposits must be with Canadian bank or Trustco
1.13 A deposit with a Canadian branch of a bank, a deposit with a Canadian trust company, or any other deposit within the meaning assigned by the Canada Deposit Insurance Corporation Act is a qualified investment. This accommodates guaranteed investment certificates, term deposits and other forms of deposits of money. Because the definition of deposit under that Act excludes foreign-denominated deposits and deposits with a maturity of longer than five years, such deposits will qualify only if the deposit is with a Canadian branch of a bank or a Canadian trust company.
Several day grace period for cash deposited with broker
1.15 With some transactions involving securities, a registered plan may be required to leave cash on deposit with a broker. While such a deposit is generally not a qualified investment, the CRA will not apply the adverse income tax consequences described in ¶1.69 - 1.80 if the deposit is left with the broker for no more than a few days.
Following the amendment retroactive to June 27, 1999 "taxpayers may now approach a financial institution and request that dividends paid in the United States dollars to an RRIF be held in that currency".
27 July 1994 T.I. 941656 (C.T.O. "RRSP Entering into a Spread with Options") (see also 30 January 1995 T.I. 943068)
Where an RRSP is required to leave cash on deposit with a broker to cover the possible exercise of a call option granted by the RRSP to the option holder to purchase shares from the RRSP, such cash may or may not be a qualified investment. If the cash is left on deposit with a broker for any length of time, the deposit will not be a qualified investment under s. 204(e)(i).
19 May 1993 T.I. (Tax Window, No. 31, p. 5, ¶2512)
Cash on deposit by an RRSP with a broker to cover the possible exercise of a naked call option written by it would not be considered a qualified investment if the cash were on deposit for any length of time.
Singer, "RRSPs Can Invest in a Wide Range of Fixed Income Securities", Taxation of Executive Compensation and Retirement, May 1990, p. 286.
Where a deposit is negotiable or is not redeemable without capital penalty, it is regarded as a corporate obligation rather than as a deposit.
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|Tax Topics - Income Tax Act - Section 146 - Subsection 146(1) - Qualified Investment||0|
Undivided interests in strip coupons
1.37 ... Provided the original bond is a qualified investment, both the interest-paying portion and the principal portion of the bond (often referred to as the coupon and the residual, respectively) will also be qualified investments. An undivided interest in a right to receive such coupon or residual payments will also qualify.
13 May 1994 T.I. 940980 (C.T.O. "RRSP Qualified Investment - Crown Corporation")
Bonds issued by provincial crown corporations are qualified investments.
4 April 1991 T.I. (Tax Window, No. 2, p. 26, ¶1193)
A banker's acceptance is not a "similar obligation" because it is a bill of exchange and does not evidence indebtedness of the issuer.
David W. Glicksman, Kevin Kelly, "Linked Instruments Offer Investor Attractions", Corporate Finance, Vol. XII, No. 2, p. 1182.
A rating provided by an affiliate or subsidiary of a listed rating agency may be considered a rating provided by the listed rating agency. For the purpose of para. (c.1), CRA will consider a rating assigned by an affiliate or subsidiary to have been assigned by the listed rating agency if it is clear "based on the facts and legal relationships" that the rating agency "would stand by the rating given."
The correspondent also asked about whether, under a rated debt issuance program, each series or tranche of debt must be individually rated for purposes of para. (c.1). CRA stated that individual rating is unnecessary "where it is clear, based on the facts, that all debt obligations issued under the debt issuance program will have the investment grade rating assigned to the debt issuance program."
Listing must be unconditional
1.20 In a new public issue of securities, the listing of the securities may be delayed for a short period of time pending fulfillment of certain conditions. A security that is approved for listing or that has a conditional approval for listing is not at that time considered to be listed on a designated stock exchange. In order for a security to qualify, the listing must be full and unconditional.
Delisting not inconsistent with public corp status
1.21 Shares of a corporation resident in Canada that were listed on a designated stock exchange in Canada but that have been suspended from trading or delisted will generally retain their qualified investment status on the basis that such a corporation continues to be a public corporation. ...
1.22 An American Depositary Receipt is a qualified investment, provided that the property represented by the receipt (generally a share of a company listed on a stock exchange outside the United States) is listed on a designated stock exchange. Many American Depositary Receipts are themselves listed on a designated stock exchange and thus also qualify on the basis of being a listed security... .
Other FX contracts not qualified
1.46 Foreign currency is generally a qualified investment, as discussed in ¶1.12. Foreign exchange contracts that are listed on a designated stock exchange are also qualified investments if the holder’s risk of loss does not exceed the holder’s cost (see ¶1.16). This would include, for example, foreign currency options. Most other listed foreign exchange contracts, such as foreign currency futures contracts, are not qualified investments because the risk of loss exceeds the cost of the contract. Foreign exchange contracts that trade on the over-the-counter (OTC) markets, such as swap or forward contracts, are not qualified investments. ...
1.68 The fact that a security may be subject to an escrow agreement will not in and of itself cause it to be a non-qualified investment for a registered plan... .
27 March 2014 Ministerial Correspondence 2014-0518601M4 - Non-qualified investments held in registered plans
"In our view, the term "securities" should be given a broad application and interpreted using the ordinary meaning of the term."
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|Tax Topics - Income Tax Act - Section 207.04 - Subsection 207.04(2)||tax triggered when qualified investment becomes non-qualified||102|
4 November 1999 T.I. 992430
Prior to the amendments announced by Finance on 18 December 1998, WEBS qualified as shares listed a prescribed foreign stock exchange, whereas SPDRS and Diamonds were not qualified investments.
1997 Ruling 1 January 1997 9716083
American depositary shares would be considered to be shares for purposes of s. 7, as CRA previously had concluded that they were shares for purposes of s. 146(1).
28 February 1992 T.I. (Tax Window, No. 17, p. 17, ¶1772)
Because the Canadian Over-the-Counter Automated Trading System is not a prescribed stock exchange in Canada, shares traded on this system would not be qualified investments unless the corporation was a public corporation.
Read, "Technical Matters", 89 C.R. p. 783
A share that is "approved for listing" or that has a "conditional approval for listing" is not at that time listed on a prescribed stock exchange.
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|Tax Topics - Income Tax Regulations - Regulation 4900 - Subsection 4900(1) - Paragraph 4900(1)(e)||38|
23 June 1995 T.I. 951013 (C.T.O. "RRSP Qualified Inv. U.S. Index Security")
An American Depository Receipt is a qualified investment for an RRSP because the ADR represents ownership of the underlying shares and assuming that the relationship between the RRSP and the depository does not constitute a trust.
14 September 1994 External T.I. 5-942185 -
Where the only prescribed stock exchange on which a share is listed is outside Canada, a delisting of the share will generally cause the share to cease to be RRSP eligible. However, cease trading orders or halts in trading will not, of themselves, normally cause the delisting of a share.