7 February 1997 External T.I. 9701305 - RRSP SHARES

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 certain shares qualified investments for an rrsp?

Position TAKEN:

No position on specific shares provided. Gave routine information

Reasons FOR POSITION:

This is a factual proposal.

XXXXXXXXXX		                                        970130

Attention: XXXXXXXXXX

February 7, 1997

Dear Sirs:

Re: Shares as Qualified Investments for an RRSP

This is in reply to your facsimile received January 15, 1997, concerning the above-noted topic.

As advised by telephone, (Harding, XXXXXXXXXX) the information provided in your letter relates to a specific factual situation and written confirmations of the tax implications inherent in particular transactions can only be given by this Directorate where the transactions are proposed and are the subject matter of an advance ruling request submitted in the manner set out in Information Circular 70-6R3, dated December 30, 1996. Furthermore, as explained in our telephone messages, we would not be able to provide any ruling with respect to the shares in question since their eligibility as qualified investments for an RRSP will be a question of fact that may only be determined on the basis of the facts at the time the shares are to be acquired by a particular RRSP. However, as requested, we can provide the following general comments which may be of assistance to you.

Generally an RRSP can invest in shares of a corporation if the shares are listed on a prescribed stock exchange in a country other than Canada such as NASDAQ.

While an RRSP may hold a share of a corporation that is a qualified investment for the RRSP, the share may also be a "foreign property" as defined in subsection 206(1) of the Income Tax Act (the "Act") such that the RRSP may be subject to taxation in accordance with subsection 206(2) of the Act. This tax is discussed in the Department's Interpretation Bulletin IT-412R2 Foreign Property of Registered Plans (enclosed). Particular to your situation you should note that paragraph 3.(a) of the Bulletin indicates that shares of Canadian corporations (as discussed above) are not normally foreign property. However, paragraph 3(e) of the Bulletin does describe an exception and recent amendments to the definition have been proposed that will significantly alter the scope of this exception. As proposed, shares and debt obligations of some Canadian corporations may be foreign property if shares of the corporation can reasonably be considered to derive their value, directly or indirectly, from foreign property and the shares are not excepted from the provision. This provision will in general not have application to most corporations operating an active business. However, the provisions proposed are complex and should be considered carefully.

The above comments are an expression of opinion only and are not binding on the Department. We trust, however, that they will be of assistance to you.

Yours truly,

for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch

ENC.