Regulation 4901 - Interpretation

Subsection 4901(1)

Administrative Policy

12 June 2002 External T.I. 2002-0138625 - REGISTERED INVESTMENTS FUTURES CONTRACTS

whether currency and interest rates futures contracts are prescribed investment turns on Reg. 4900(1)(e) (likely, yes)

Regarding a query as to whether currency and interest rates futures contracts would qualify as a prescribed investment for a registered investment, CRA stated:

A condition for registration under subsection 204.4(2) is that a trust or corporation must only hold prescribed investments. In accordance with [Reg.] 4901(1) … a prescribed investment for a registered investment … is a qualified investment for … a registered retirement savings plan ("RRSP"), registered retirement income fund ("RRIF") and deferred profit sharing plan ("DPSP"), respectively.

The kinds of property that are qualified investments for an RRSP, RRIF or a DPSP are described in … [ss.] 146(1), 146.3(1) and section 204 … [and Reg.] 4900 … . In particular, [Reg.] 4900(1)(e) … states that a warrant or right is a qualified investment for a trust governed by an RRSP, a RRIF, or a DPSP if it gives the owner the right to acquire, either immediately or in the future, property that is a qualified investment. In addition [see] paragraph 21 of … IT-320R3 … .

Locations of other summaries Wordcount
Tax Topics - Income Tax Regulations - Regulation 4900 - Subsection 4900(1) - Paragraph 4900(1)(e) whether currency and interest rates futures contracts were qualified investments turned on IT-320R3, para. 21 211

Subsection 4901(2)

Designated Shareholder

Administrative Policy

6 June 1994 External T.I. 9411825 - RRSP - DESIGNATED SHAREHOLDER

Respecting the situation where a number of the limited partners of an SBILP are RRSP trusts, RC stated that "in our opinion, an annuitant under a trust governed by an RRSP is not related to that RRSP, since there is no rule in subsection 251(2) of the Act which causes an annuitant to be related to the RRSP."

3 February 1992 T.I. (Tax Window, No. 16, p. 15, ¶1725)

Paragraph (d) of the definition of "designated shareholder" does not provide an exception for persons having a nominal interest in a company or having little or no influence concerning its management.

Qualifying Share

Administrative Policy

14 October 2009 External T.I. 2009-0324331E5 F - Placement admissible, part de coopérative

share that is not entitled to receive an allocation in proportion to patronage in respect of consumer goods or services could be a qualified investment

In finding that both of the conditions of the definition of "qualifying share" listed in Reg. 4901(2)(a) and (b) are not required to be satisfied in order for a co-operative share to be a qualified investment, CRA stated:

Where one or other of the conditions in the definition of "qualifying share" in subsection 4901(2) of the Regulations is satisfied, a cooperative share may be a qualified investment if the conditions set out in subsection 4900(12) of the Regulations are otherwise satisfied. For example, subject to subsection 4900(12), a qualifying share that is not entitled to an Allocation in Proportion to Patronage could be a qualified investment.

Specified Small Business Corporation

Administrative Policy

S3-F10-C1 - Qualified Investments – RRSPs, RESPs, RRIFs, RDSPs and TFSAs

Timing of qualifications

1.60 The conditions that the corporation be a specified small business corporation, and that the shares not be a prohibited investment, need only be satisfied at the time the RRSP, RRIF or TFSA acquires the shares.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 204 - Qualified Investment - Paragraph (a) 296
Tax Topics - Income Tax Act - Section 262 133
Tax Topics - Income Tax Act - Section 204 - Qualified Investment - Paragraph (d) 388
Tax Topics - Income Tax Regulations - Regulation 4900 - Subsection 4900(1) - Paragraph 4900(1)(b) 294
Tax Topics - Income Tax Act - Section 204.4 - Subsection 204.4(1) 172
Tax Topics - Income Tax Regulations - Regulation 4900 - Subsection 4900(2) 64
Tax Topics - Income Tax Regulations - Regulation 4900 - Subsection 4900(1) - Paragraph 4900(1)(j) 167
Tax Topics - Income Tax Regulations - Regulation 4900 - Subsection 4900(1) - Paragraph 4900(1)(j.1) 75
Tax Topics - Income Tax Act - Section 204 - Qualified Investment - Paragraph (b) 65
Tax Topics - Income Tax Regulations - Regulation 4900 - Subsection 4900(1) - Paragraph 4900(1)(e) 217
Tax Topics - Income Tax Act - Section 207.01 - Subsection 207.01(1) - Advantage - Paragraph (b) 85
Tax Topics - Income Tax Regulations - Regulation 4900 - Subsection 4900(1) - Paragraph 4900(1)(u) 92
Tax Topics - Income Tax Regulations - Regulation 4900 - Subsection 4900(1) - Paragraph 4900(1)(v) 60
Tax Topics - Income Tax Regulations - Regulation 5100 - Eligible Corporation 54
Tax Topics - Income Tax Act - Section 207.04 - Subsection 207.04(4) 92
Tax Topics - Income Tax Act - Section 146 - Subsection 146(10.1) 100
Tax Topics - Income Tax Act - Section 207.01 - Subsection 207.01(6) 128
Tax Topics - Income Tax Act - Section 146 - Subsection 146(4) - Paragraph 146(4)(a) 138
Tax Topics - Income Tax Act - Section 146 - Subsection 146(4) - Paragraph 146(4)(b) 104
Tax Topics - Income Tax Act - Section 146.2 - Subsection 146.2(6) 196

25 January 2018 External T.I. 2017-0717561E5 - specified small business corporation

guidelines on when cash is used in an active business

A corporation in its start-up phase has used a portion of the funds raised to date to cover specific business expenses. Would the remainder of those funds held by it as cash be considered to be used principally in an active business, as required under the “specified business corporation” definition in Reg. 4901(2), such that its shares would be qualified investments for an RRSP under Reg. 4900(14)(a)(i)?

After noting that in order for the funds to so qualify, it would be necessary to first determine that business operations had in fact commenced, CRA provided guidelines (which were “necessarily of a general nature”) on the test of use principally in an active business, including the following:

  • Cash or near cash property is considered to be used principally in the business if its withdrawal would destabilize the business.
  • Cash which is temporarily surplus to the needs of the business and which is invested in short-term income producing investments may be considered to be used in the business.
  • Cash balances which accumulate and are then depleted in accordance with the annual seasonal fluctuations of an ongoing business will generally be considered to be used in the business, but a permanent balance in excess of the company's reasonable working capital needs will generally not be considered to be so used.
  • The accumulation of funds in anticipation of the replacement or purchase of capital assets or the repayment of a long-term debt will not generally in itself qualify the funds as being used in the business.
  • [C]ash and near cash assets held to offset the non-current portion of long term liabilities will not generally be considered to be used in the business.
Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Small Business Corporation excess cash not an active business asset 160

S3-F10-C2 - Prohibited Investments – RRSPs, RRIFs and TFSAs

Grace period to restore SSBC status

2.16 ...

Example 2

Shares of XYZ Corporation are a qualified investment under subparagraph 4900(14)(a)(i) by virtue of the corporation being a specified small business corporation (SSBC), as defined in subsection 4901(2) of the Regulations. Midway through its 2016 tax year, the corporation’s asset mix changes such that it no longer meets the definition’s active business test.

XYZ Corporation met the active business test at the end of its 2015 tax year. This means that it will retain its status as an SSBC for the remainder of its 2016 tax year in accordance with the SSBC definition.

The shares will be a prohibited investment at the beginning of the corporation’s 2017 tax year by operation of subsection 4900(15) of the Regulations.

The corporation could avoid the application of subsection 4900(15) if it takes steps to satisfy the active business test at the end its 2016 tax year. ...

27 January 2014 External T.I. 2013-0504191E5 F - RRSP, qualified investment

general discussion of SSBC definition

In the course of a general discussion, CRA stated:

[A]n SSBC is a corporation that would, at that time or at the end of the last taxation year of the corporation that ended before that time, be a “small business corporation” (SBC) within the meaning of the definition in subsection 248(1) of the Act if certain passages of that definition were changed. Among these, note that the corporation must be a Canadian corporation. Principally, it must be a corporation incorporated in Canada, not a Canadian-controlled private corporation. Furthermore, the corporation must not be controlled directly or indirectly in any manner whatever, by one or more non-resident persons.

To qualify as an SSBC ... all or substantially all of the fair market value of the corporation's assets must be attributable to assets that are, inter alia, used principally in an active business carried on primarily in Canada by the particular corporation or by a corporation related to it. This latter requirement must be analyzed in light of the definition of "active business" in subsection 248(1)....

[T]he term "qualifying active business" in subsection 5100(1) is relevant in the context of the analysis of a qualified investment under subsection 4900(6) while the term "active business" in subsection 248(1) of the Act is relevant in the context of a qualified investment by virtue of subsection 4900(14).

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 207.01 - Subsection 207.01(1) - Advantage - Paragraph (a) annuitant's free use of property of corporation held by RRSP is an advantage 83

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