Subsection 4900(1)
Paragraph 4900(1)(b)
Administrative Policy
S3-F10-C1 - Qualified Investments – RRSPs, RESPs, RRIFs, RDSPs, FHSAs and TFSAs
Back-dating rule effective for Reg. 4900(1)(b) purposes
1.24 The post-amble of the public corporation definition in subsection 89(1) allows a new corporation to elect to be deemed to have been a public corporation since its date of incorporation. ...[A]ny otherwise non-qualifying shares or debt obligations of the new corporation acquired by a registered plan between the date of incorporation and the time at which the corporation becomes a public corporation will be a qualified investment from the time they are so acquired. Accordingly, any non-qualified investment taxes that would otherwise apply would be rendered inapplicable.
Instalment receipt
1.67 An instalment receipt reflects a partial payment on property and gives the owner an interest (or for civil law, a right) in that property. If the receipt reflects a partial payment on, for example, a share listed on a designated stock exchange, the interest or right in that share will constitute a qualified investment for the registered plan. For example, a corporation may have an arrangement to sell shares on an instalment basis, where the shares are sold at a predetermined price with a portion of the sale price payable at the time of sale and the balance to be paid at some future date. The purchase and ownership of the shares are evidenced by the instalment receipt issued to the purchaser at the time of the initial payment.
Escrow agreement
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... .
3 January 2002 External T.I. 2001-0109425 F - REER TITE D'UNE SOCIETE EN FAILLITE
Regarding whether a taxpayer can keep a security of a bankrupt corporation in the taxpayer’s RRSP, CCRA stated:
[A]n RRSP may retain its holdings in a corporation that becomes bankrupt for as long as the corporation continues to exist. In such a case, the cost of the securities will not change simply because the corporation has become bankrupt. However, when the corporation legally ceases to exist, it is our view that the RRSP trust disposes of the securities it holds in the corporation at the time the corporation ceases to exist.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Regulations - Regulation 4900 - Subsection 4900(14) | Reg. 4900(12) share continues as qualified investment following bankruptcy | 89 |
24 June 1994 External T.I. 9409235 - MUTUAL FUND UNITS AS QUALIFIED INVESTMENT FOR RRSP
Because one of the criteria in s. 131(8)(a) is that the corporation be a public corporation, a share of a mutual fund corporation will be a qualified investment for an RRSP.
23 February 1994 External T.I. 9402255 - HAA2255-7 RRSP INVESTMENTS PUBLIC CORPORATIONS
A corporation can verify its status as a public corporation through the District Office at which it files its returns. Many RRSP trustees will accept such confirmations as evidence of a corporation's shares eligibility for an RRSP.
1 June 1993 Income Tax Severed Letter 930642A F - Qualified Investment
Shares represented by an instalment receipt and that are pledged to a seller of shares to secure the obligation of the holder to pay the unpaid purchase price for the share will be a qualified investment provided the shares of the corporation are listed for trading on a prescribed stock exchange.
13 January 1993 T.I. (Tax Window, No. 28, p. 18, ¶2397)
The delisting of a share, the suspension of its trading or the bankruptcy of the corporation will generally not cause the share to become an ineligible investment.
7 April 1992 T.I. (Tax Window, No. 18, p. 18, ¶1867)
Escrowed shares may constitute a qualified investment.
7 November and 19 December 1990 T.I. (Tax Window, Prelim. No. 2, p. 19, ¶1060)
Where shares of a corporation are not qualified at the time of acquisition because the corporation is not a public corporation, they cannot become qualified investments even if the corporation subsequently makes a valid election under s. 89(1)(g). However, where the trust acquire shares on a particular day and sometime during the same day the corporation becomes a public corporation, the shares will be qualified investments.
4 July 1989 T.I. (Dec. 89 Access Letter, ¶1058)
Shares of a class which are not listed on an exchange are qualified investments where shares of another class of the corporation are listed.
Paragraph 4900(1)(c.1)
Administrative Policy
4 May 2006 Roundtable, 2005-0161541C6 F - Placements admissibles - dépôts
Is a guaranteed investment certificate or term deposit denominated in Canadian or foreign currency issued by a bank in Canada or a trust company a qualified investment for an RRSP? Before going on to refer to other potential grounds of qualification, CRA stated:
[I]n general, a guaranteed investment certificate or term deposit, denominated in Canadian or foreign currency and issued by a bank in Canada, would qualify as a "bond, debenture, note or similar obligation” specifically described in paragraph (b) of the definition of "qualified investment" in subsection 146(1),
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 204 - Qualified Investment - Paragraph (b) | GIC or term deposit is a similar obligation | 94 |
| Tax Topics - Income Tax Act - Section 204 - Qualified Investment - Paragraph (f) | GIC could qualify under para. (b) or (f) | 123 |
| Tax Topics - Income Tax Act - Section 204 - Qualified Investment - Paragraph (a) | not a qualifying deposit if payable outside Canada or in foreign currency | 181 |
6 February 2001 External T.I. 2001-0066525 - GIC denominated in foreign currency
In responding to a question as to whether a guaranteed investment certificate ("GIC") issued by a Canadian bank and denominated in a foreign currency would constitute a foreign property, CCRA stated:
[A] GIC is a similar obligation to bonds, debentures, notes or mortgages. As such, if issued by a chartered Canadian bank, it would be a qualified investment for an RRSP in accordance with paragraph (b) of the definition of qualified investment in subsection 146(1) of the Act. Furthermore, since the chartered Canadian bank is a resident of Canada, the GIC will not be a foreign property within the meaning of subsection 206(1) … .
29 August 1995 External T.I. 9506325 - SIMILAR OBLIGATIONS AND 212(1)(B)(II)(C)(II)
Regarding whether the interest on a GIC issued in non-Canadian currency by a provincial Crown agent qualified as being on “bonds, debentures, notes, mortgages, hypothecs or similar obligations” under s. 212(1)(b)(ii)(C)(II), Revenue Canada stated:
[T]he expression "similar obligation" should be interpreted in the light of the words "bonds, debentures, notes, mortgages" which precede it in the relevant provision. The obligations listed represent similar written obligations, which contain an explicit promise by the issuer to reimburse an amount on a given day. To be a similar obligation, an obligation must also be of the same nature as the obligations listed. It appears that a guaranteed investment certificate issued for a specific term may be of the same nature as a debenture or a note acknowledging indebtedness; accordingly, we have reconsidered our position. Thus, in our view, term deposits and guaranteed investment certificates issued by XXXXXXXXXX to non-residents would constitute similar obligations for the purposes of subclause 212(1)(b)(ii)(C)(II) … .
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 212 - Subsection 212(1) - Paragraph 212(1)(b) - Subparagraph 212(1)(b)(ii) | 40 |
4 April 1991 External T.I. 9104835 F - Interpretation of Bonds, Debentures, Notes or Similar Obligations
In finding that banker’s acceptances were not qualified investments under former s. 204(e)(iii), Revenue Canada stated:
[B]onds, debentures and notes are promises by the issuer of the document to pay a specified amount on the terms set forth in the document and, as such, evidence the indebtedness of the issuer vis-à-vis the person to whom the document is addressed. Banker's acceptances require the person to whom it is addressed to pay a specified amount to a specified person at a specified time. They are not evidence of indebtedness of the issuer. Technically a banker's acceptance is a bill of exchange; bonds, debentures and notes are not. Accordingly it cannot be said that banker's acceptance are obligations which are similar to bonds, debentures and notes … .
Paragraph 4900(1)(d)
Administrative Policy
11 January 2002 External T.I. 2001-0106745 - MFI CLASS OF UNITS QUALIFIED INVESTMENT
Units from a mutual fund trust's different classes of units will satisfy Regulation 4900(1)(d) even if a particular class does not satisfy the conditions in Regulation 4801.
Paragraph 4900(1)(d.1)
Administrative Policy
4 December 2000 External T.I. 2000-0054365 - MUTUAL FUND TRUST PRES. STOCK EXCH.
"Since debts of a public corporation that only has one class of shares that trade on a prescribed stock exchange will be a qualified investment under paragraph 4900(1)(c.1) of the Regulations, it must have been intended that debts of a mutual fund trust with one class of units that trade on a prescribed stock exchange will also be a qualified investment under paragraph 4900(1)(d.1) ... ."
Paragraph 4900(1)(d.2)
See Also
Grenon v. The Queen, 2021 TCC 30
The taxpayer’s RRSP invested in units of unit trusts (the “Income Funds”) which Smith J found were not units of mutual fund trusts and, therefore were not qualified investments for RRSPs under Reg. 4900(1)(d), given that the distribution of the units to the initial investors had not complied with the offering memorandum (OM) exemption under provincial securities’ laws (because, as interpreted by him, it was not available where a portion of the investors were minors or were adults who themselves had not signed key documents such as risk acknowledgements) and, thus, had not qualified under Reg. 4801(a)(i)(A). Furthermore, although it may have been possible to rely on other exemptions to establish a lawful distribution, this did not matter because in the reporting of the distribution to the Commissions, reliance had been placed only on the offering memorandum (OM) exemption. In this regard, he stated (at para. 271):
While it may be possible to rely on multiple exemptions, it is not possible to do so on an ex post facto basis.
Smith J also rejected an alternative argument of the taxpayer that the units qualified under Reg. 4900(1)(d.2), since that provision inter alia also required that there had been a lawful distribution and, as described above, he considered that this required compliance with the OM exemption, since that was what had been relied upon in the reporting of the distribution to the securities’ commissions. He further stated, obiter (at para. 344):
[T]his provision has very little practical application today since it was introduced as a retroactive relieving measure in 2001 for units of certain mutual funds sold by private placement between 1993 and 1999.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Regulations - Regulation 4801 - Paragraph 4801(a) - Subparagraph 4801(a)(i) - Clause 4801(a)(i)(A) | distribution of units that included significant purchases by minors and by adults who did not pay for their own units, was unlawful | 756 |
| Tax Topics - Income Tax Act - Section 245 - Subsection 245(4) | purported establishment of “alter ego” MFTs through which an RRSP could invest in operating businesses was an abuse engaging GAAR | 605 |
| Tax Topics - Income Tax Act - Section 204.2 - Subsection 204.2(1.1) | alleged distribution from non-qualified investment was not an over-contribution | 277 |
| Tax Topics - General Concepts - Window Dressing | window-dressing is a deception about intention | 312 |
| Tax Topics - Income Tax Act - Section 207.1 - Subsection 207.1(1) | non-qualified investments not “included” in annuitant’s income because it was never assessed | 346 |
| Tax Topics - Income Tax Act - Section 152 - Subsection 152(4) | CRA’s assessing listed taxable RRSPs in a T3GR global return was not of the taxpayer’s (also listed) RRSP /inappropriate reliance in legal opinion on certificate of fact was carelessness | 441 |
| Tax Topics - Income Tax Act - Section 207.2 - Subsection 207.2(3) | CRA’s assessment of Pt. XI.1 shown on the T3GR for all RRSPs of one type did not start the normal reassessment period for the taxpayer’s RRSP since no tax shown for it | 370 |
Paragraph 4900(1)(e)
Administrative Policy
12 June 2002 External T.I. 2002-0138625 - REGISTERED INVESTMENTS FUTURES CONTRACTS
CRA indicated that whether currency and interest rates futures contracts are prescribed investments for a registered investment (i.e., under Reg, 4901(1), whether they were qualified investments for an RRSP, RRIF or DSP) turned on whether they came within Reg. 4900(1)(e), as to which CRA referred to IT-320R3, para. 21.
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 4901 - Subsection 4901(1) | whether currency and interest rates futures contracts are prescribed investment turns on Reg. 4900(1)(e) (likely, yes) | 160 |
S3-F10-C1 - Qualified Investments – RRSPs, RESPs, RRIFs, RDSPs, FHSAs and TFSAs
Writing puts and calls not subject to rules
1.40 When writing put and call options ... , no property is actually acquired by the option writer at the time the option is sold besides the option premium. ... Therefore, option writing, in and of itself, is generally not subject to the qualified investment rules. ...
Deposits of cash to cover margin requirements
1.43 ... [A]n option writer may be required to deposit cash with their brokerage firm to cover their obligation under the option agreement. As noted in ¶1.15, if the deposit is left with the broker for longer than a few days, the deposit would not be a qualified investment. ...
Advantage tax
1.44 The advantage tax in section 207.05 could apply if an RRSP, RRIF or TFSA trust were to engage in certain option transactions. For example, this would be the case where:
- the counterparty to the option contract does not deal at arm's length with the annuitant or holder, or
- the contract does not reflect commercial terms, which serves to artificially shift value into or out of the registered plan.
15 March 2010 External T.I. 2009-0345001E5 - Qualified Investment for a RRSP
Are subscription receipts issued by a private Canadian corporation qualified investments under Reg. 4900(1)(e) if they entitle the holder to acquire treasury shares of the corporation after they become listed on a designated stock exchange? CRA stated:
[T]his paragraph requires that the underlying property to be acquired by the option, warrant or similar right must be a qualified investment the entire time the subscription receipt is held by the trust governed by an RRSP.
...[T]he underlying properties of the subscription receipts are treasury shares of a corporation which will only be a qualified investment when they become listed on a designated stock exchange. Therefore...until the treasury shares are listed on a designated stock exchange, the subscription receipts would not provide the right to acquire properties that are qualified investments and would not be qualified investments pursuant to paragraph 4900(1)(e)... .
1 August 2007 External T.I. 2007-0247291E5 - Qualified Investments - Subscription Receipts
Are subscription receipts that provide the holder with the right to receive a cash settlement in lieu of delivery of the underlying property, qualified investments? CRA stated:
Generally, money and deposits of money will be considered to be a qualified investment provided the money is legal tender in Canada. Therefore…a subscription receipt would not be precluded from qualifying as a qualified investment under paragraph 4900(1)(e.01) solely because it provides the holder with the right to receive a cash settlement in lieu of delivery of the underlying property.
24 March 1997 External T.I. 9705785 - SPECIAL WARRANT, QUALIFIED INVESTMENT
The underlying property must be a qualified investment throughout the period that the warrant or right is held by the RRSP. Accordingly, where the shares that can be acquired on the exercise of a special warrant will not be qualified investments until a prospectus has been cleared, the special warrants will not be qualified investments until that time.
31 October 1996 T.I. 962433 (C.T.O. "RRSP Options")
Because shares of a corporation listed on a prescribed stock exchange outside of Canada are qualified investments under paragraph (a) of the definition of "qualified investment" in s. 146(1), employees can transfer their options to acquire shares of their parent corporation traded on the New York Stock Exchange to their RRSPs.
30 January 1995 External T.I. 9430685 - RRSP QUALIFIED INVESTMENTS - PUTS & CALLS
Index options are not qualified investments for an RRSP except in respect of the particular time, if any, when it can be clearly established that cash will be realized if the options are exercised at that time.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 146 - Subsection 146(10) | 75 | |
| Tax Topics - Income Tax Act - Section 146 - Subsection 146(4) | 18 | |
| Tax Topics - Income Tax Act - Section 146 - Subsection 146(9) | 44 |
27 October 1994 Internal T.I. 9421586 - REGISTERED INVESTMENT AND STOCK INDEX FUTURES CONTRACT
A stock index futures contract is not a qualified investment for a deferred income plan or a prescribed investment for a registered investment.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 132 - Subsection 132(6) | stock index futures | 16 |
| Tax Topics - Income Tax Act - Section 204.6 - Subsection 204.6(1) | no tax under s. 204.6 if qualify as an MFT/tax for quasi-MFT re futures contract based on transaction costs | 139 |
27 October 1994 External T.I. 9427105 - OPTIONS AS RRSP QUALIFIED INVESTEMENTS
If the subject of a call option is a qualified investment, the call options is a qualified investment. However, a put option is property which is not a qualified investment.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 146 - Subsection 146(4) | 23 | |
| Tax Topics - Income Tax Act - Section 146 - Subsection 146(9) | 17 |
24 October 1994 External T.I. 9426305 - CONVERTIBLE DEBENTURES AS QUALIFIED INVESTMENTS
A debenture that is convertible into shares of an eligible corporation or shares of a small business corporation will not qualify under Regulation 4900(1)(e) as a right to acquire a qualified investment.
31 August 1994 External T.I. 9420195 - TSE 35 PUT WARRANTS, QUALIFIED INVESTMENTS FOR RRSPS
TSE 35 index warrants "would not be qualified investments for an RRSP except in respect of a particular time, if any, when it can be clearly established that cash would be realized if the warrants are exercised at that time".
19 May 1993 T.I. (Tax Window, No. 31, p. 5, ¶2512)
A put option is not a qualified investment as it is a right to dispose of, rather than to acquire, a security.
92 C.R. - Q.51
A "poison pill" warrant that cannot be severed from the share to which it relates and that, therefore, cannot itself be listed, will not be a qualified investment. However, this will only be of significance in cases where the poison pill warrant has a value, which is not usually the case.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 15 - Subsection 15(1) | 38 | |
| Tax Topics - Income Tax Act - Section 49 - Subsection 49(1) | 25 |
31 July 1991 T.I. (Tax Window, No. 7, p. 21, ¶1380)
Rights of shareholders to acquire additional shares at a discount in the event of a take-over bid do not meet the requirements of Regulation 4900(1)(e) prior to the occurrence of the take-over bid. If the bid occurs, the right would only qualify if the requirements of Regulation 4900(1)(e) were met at that time.
6 June 1990 T.I. (November 1990 Access Letter, ¶1540)
Nikkei put warrants are not qualified investments because they do not give the owner the right to acquire a qualified investment at all times.
19 April 1990 T.I. (September 1990 Access Letter, ¶1431)
Re eligibility of listed warrants or call options.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 146 - Subsection 146(4) | 39 |
Read, "Technical Matters", 89 C.R. p. 783
Where in an issue of shares and warrants, separate trading of the warrants and shares for a period of time, typically thirty days, is prohibited for security law reasons, during such period the warrants are not qualified investments.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 204 - Qualified Investment - Paragraph (d) | 28 |
Articles
Leslie Morgan, "Warrants, Rights and Options as Qualified Investments", Corporate Finance, Vol. XII, No. 1, 2004, p. 1158.
Paragraph 4900(1)(g)
Administrative Policy
25 June 1991 T.I. and May 1991 Question and Answer (Tax Window, No. 3, p. 23, ¶1225)
Bonus interest paid by a credit union on invested funds which remain in the RRSP will not cause the investment to be non-qualified, nor will a patronage rebate which is paid directly into the plan.
Paragraph 4900(1)(i)
Administrative Policy
12 May 1995 External T.I. 9513105 - REGISTERED CHARITY DEBENTURES FOR RRSP
Debentures issued by a non-profit, non-share corporation that are not guaranteed by any third party will not be qualified investments.
11 October 1994 Internal T.I. 9417147 - RRSP QUALIFIED INVESTMENT IN DEBENTURES
A debenture from a Canadian subsidiary of a corporation whose shares are listed on the Vancouver Stock Exchange is a qualified investment for an RRSP notwithstanding that the proceeds of the debenture are loaned by the subsidiary to a non-listed foreign corporation.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 206 - Paragraph 206(1)(d.1) | 162 |
21 December 1993 T.I. HAA7255-7 (C.T.O. "Interest in a Bond as Qualified Investment for RRSP")
"An 'interest' in a bond or similar obligation that is a qualified investment for an RRSP pursuant to paragraph 4900(1)(i) of the Income Tax Regulations may also be such a qualified investment if the holder of the interest would have the same rights as a direct holder of the bond but for the interposition of an agent or bare trustee".
Subparagraph 4900(1)(i)(ii)
Articles
Chris Lang, Keaton Buchberger, "The RRSP Trap: A Cautionary Illustration of the Risk of Non-Conventional Investment Structures", Tax for the Owner-Manager, Vol. 25, No. 2, April 2025, p. 7
Description of structure for RRSP funding of Realtyco controlled by Pubco (p. 7)
- The following arrangement is now being marketed as a structure for facilitating the use of RRSP funds to invest in real estate:
- A corporation (“Pubco”) whose shares listed on a designated stock exchange in Canada subscribes for voting preferred shares of a Canadian private corporation (Realtyco) so that it is controlled by Pubco.
- The RRSPs of various investors subscribe for interest-bearing debentures of Realtyco, with Realtyco using such funds to acquire real estate.
- Such investors subscribe for the common shares of Realtyco outside of their RRSPs.
RRSP eligibility (pp. 7-8)
- Under Reg. 4900(1)(i)(ii), debentures issued by a corporation controlled by a corporation whose shares are listed on a designated stock exchange in Canada are qualified investments for most registered plans including RRSPs.
- If Pubco ceases to control Realtyco at any point, or its shares are delisted, the debentures will become non-qualified investments.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 207.01 - Subsection 207.01(1) - Advantage - Paragraph (a) | 149 |
Paragraph 4900(1)(j)
See Also
Stewart v. The Queen, 2019 TCC 22
A corporation that was unrelated to the taxpayers (“Zowtra”) granted a mortgage for $1.8 million (the “Zowtra Mortgage”) on Alberta lands that it had purchased for $5,000 to an Edmonton finance company (“U‑Have”) controlled by the same individual as Zowtra. U-Have sold undivided interests in this mortgage (bearing interest at 12%) to the self-directed RRSPs of 35 individuals, including the taxpayers, for $1.8 million in cash. The $1.8 million mortgage and these mortgage transfers were registered with the Alberta Government Services Land Titles Office. U-Have then paid the $1.8 million received by it to Zowtra. Apparently, essentially all the funds were transferred outside Canada (with none recovered by the RRSPs) or used to pay fees.
In finding that each purchased interest qualified as a “a mortgage secured by real property situated in Canada, or an interest therein” and, thus, as a qualified investment under former Reg, 4900(4), D'Arcy J stated (at paras. 55, 57):
The term mortgage is not defined in the Income Tax Act. During the relevant period, the Alberta Land Titles Act defined mortgage as meaning “a charge on land created merely for securing a debt or loan”.
… In my view, when the appellants’ RRSPs acquired the undivided interests in the Zowtra Mortgage the relevant RRSPs acquired an interest in a mortgage, that is, an interest in “a charge on land created . . . for securing a debt or loan”. As a result, the investment by the RRSPs in the Zowtra Mortgage was a qualified investment.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 146 - Subsection 146(9) - Paragraph 146(9)(b) | mortgage issued in scam had full FMV until the funds were stolen | 415 |
| Tax Topics - General Concepts - Fair Market Value - Other | mortgage issued in a scam had full FMV | 238 |
Administrative Policy
S3-F10-C1 - Qualified Investments – RRSPs, RESPs, RRIFs, RDSPs, FHSAs and TFSAs
Acquisition of real estate on default
1.34 Real or immovable property is not a qualified investment for a registered plan. However, a registered plan might acquire real or immovable property in order to protect a mortgage or hypothecary investment that is in default. In this case, the CRA will not apply any adverse tax consequences (as described in ¶1.69 - 1.80) provided the property is offered for sale under reasonable conditions and sold within one year. A longer time frame might be possible in unusual circumstances. Any legal fees incurred for foreclosure, power of sale or other proceedings necessary to protect the investment are expenses of, and must be paid by, the registered plan. If the expenses are paid by the annuitant, holder or subscriber of the plan or by someone else, they would be treated as a contribution or gift to the plan and could give rise to adverse tax consequences. ...
27 January 2004 External T.I. 2003-0047381E5 F
CCRA indicated that the interest paid to an RRSP on a mortgage would not constitute a premium as to the portion of that interest that exceeded a market rate of interest. However, CCRA went on to indicate:
Where an RRSP holds a mortgage where the mortgage is on real property owned by the annuitant or a person who does not deal at arm's length with the annuitant, the registration of the plan trust may be impaired and/or certain benefit or penalty provisions may apply in the following circumstances:
1. the mortgage interest rate and other terms do not reflect normal commercial practice
2. the mortgage is not serviced by an approved lender as it would be if it were a mortgage on real estate owned by a foreigner.
We are of the view that the registration of the RRSP could be jeopardized if the mortgage interest rate is higher than the market rate.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 146 - Subsection 146(1) - Premium | interest received by lender to an RRSP in excess of market rate is not a “premium” | 33 |
27 March 2003 External T.I. 2002-0178035 F - HYPOTHEQUE PLACEMENT ADMISSIBLE
CCRA provided an overview of the qualification rules in Regs. 4900(1)(j) and (j.1) including noting that “[t]here is no requirement that the mortgage be a first mortgage or a residential mortgage, or that the real property that is mortgaged be the annuitant's principal residence.”
13 July 1994 Internal T.I. 9415727 - RRSP INVESTMENT INTEREST IN NON-ARM'S LENGTH MORTGAGE
Two RRSPs can each hold an interest in a single mortgage provided each interest is owned by the respective RRSP and all of the remaining conditions for holding non-arm's length mortgages in an RRSP, as described in IT-320R2, are met.
8 February 1994 External T.I. 9400615 - RRSP QUALIFIED INVESTMENT- MORTGAGE
A mortgage on a business property can be a qualified investment for an RRSP even where the mortgagor and the annuitant do not deal at arm's length, if the specific requirements of Regulation 4900(1)(j) are met.
Paragraph 4900(1)(j.1)
Administrative Policy
S3-F10-C1 - Qualified Investments – RRSPs, RESPs, RRIFs, RDSPs, FHSAs and TFSAs
Approved lender/market interest
1.36 ... The list of approved lenders is available on the CMHC website. The interest rate and other terms must reflect normal commercial practice and the mortgage or hypothec must be administered by the approved lender in the same manner as a mortgage or hypothec on property owned by a stranger. ...
1 June 2016 External T.I. 2015-0601211E5 - Mortgage loan from RRSP to make a shareholder loan
An individual, who is an RRSP annuitant, borrows the “Mortgage Loan” from the RRSP, with a principal residence mortgage granted in favour of the RRSP as security. The Mortgage Loan would be administered by an approved lender under the National Housing Act and would be insured as required by Reg. 4900(1)(j.1) by an approved private insurer. The Mortgage Loan proceeds would be used to make an interest-free shareholder loan to a corporation (the “Corporation”) in which the individual held shares and controlled, with the Corporation paying off a corporate line of credit. Is the Mortgage Loan a qualified investment, and is the individual’s use of the funds received on the Mortgage Loan to make the shareholder loan an eligible use of the RRSP’s property? Before going on to address the advantage and prohibited investment rules in Part XI.01, and after indicating that the Mortgage Loan would be a qualified investment under Reg. 4900(1)(j.1), CRA stated:
There are no express restrictions under paragraph 4900(1)(j.1)…on the individual’s use of the funds received on the Mortgage Loan.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(c) | money borrowed by individual from RRSP to make interest-free loan to corporation | 181 |
| Tax Topics - Income Tax Act - Section 207.01 - Subsection 207.01(1) - Advantage - Paragraph (a) | 4900(1)(j.1) insurance requirements generally arm's length/potential advantage on default | 247 |
| Tax Topics - Income Tax Act - Section 207.01 - Subsection 207.01(1) - Registered Plan Strip | 4900(1)(j.1) mortgage loan unlikely to be acquired at less than FMV | 225 |
20 July 2001 External T.I. 2001-0092425 F - PLACEMENTS ADMISSIBLES SPCC
Regarding whether the sole shareholder of a Canadian corporation can acquire a moveable hypothec from the corporation, CCRA provided an overview of Regs. 4900(1)(j) and (j.1).
Paragraph 4900(1)(p.1)
Articles
D. Louis, "Trick or Treat? - RRSPs and Foreign Index Units", The Estate Planner, No. 46, November 13, 1998, p. 6.
Paragraph 4900(1)(s)
Administrative Policy
6 December 2001 External T.I. 2001-0113375 F - PLACEMENT REER NASDAQ
Regarding the treatment of shares listed on the Nasdaq over-the-counter market, CCRA stated:
[W]here paragraph 4900(1)(s) of the Regulations applies to a property to cause it to be prescribed as a qualified investment until December 31, 2001, there is no acquisition on January 1, 2002 of a non-qualified investment. …
[I]f a trust governed by an RRSP or a RRIF continues to hold property after December 31, 2001 to which paragraph 4900(1)(s) of the Regulations applied, the tax that the trust will have to pay under Part XI.1 of the Act will be computed at 1% of the fair market value of the property at the time it acquired it.
Paragraph 4900(1)(u)
Administrative Policy
S3-F10-C1 - Qualified Investments – RRSPs, RESPs, RRIFs, RDSPs, FHSAs and TFSAs
RCM coins
1.52 A legal tender gold or silver bullion coin produced by the Royal Canadian Mint with a minimum purity of 99.5% for gold and 99.9% for silver is a qualified investment. ... the coin must be purchased directly from the Mint or from a Canadian-resident corporation that is a bank, trust company, credit union, insurance company or registered securities dealer whose business activities are regulated by the Superintendent of Financial Institutions or a similar provincial authority (referred to ... as a specified corporation).
Paragraph 4900(1)(v)
Administrative Policy
S3-F10-C1 - Qualified Investments – RRSPs, RESPs, RRIFs, RDSPs, FHSAs and TFSAs
RCM certificates
1.54 A gold or silver certificate issued by the Royal Canadian Mint or a specified corporation is a qualified investment if the bullion represented by the certificate satisfies the conditions described in ¶1.52 or ¶1.53. In addition, the certificate must be purchased directly from the issuer or from a specified corporation.
Subsection 4900(2)
Administrative Policy
S3-F10-C1 - Qualified Investments – RRSPs, RESPs, RRIFs, RDSPs, FHSAs and TFSAs
Sub of rating agency may be accepted
1.31 ... Where the facts, corporate structure and legal relationship make it clear that a listed rating agency recognizes and would stand by the rating given by its subsidiary or affiliate, then the condition that the rating be with a prescribed credit rating agency would be satisfied.
designated shareholder
Administrative Policy
22 February 1990 T.I. (July 1990 Access Letter, ¶1337)
Where one of a group of employees owns 49% of the shares of the corporation, another unrelated employee owns 5%, and the remaining voting shares are widely held with no employee owning more than 2% of the shares, all the shareholders/employees will be designated shareholders unless the corporation is factually controlled by the shareholder/employee who owns 49% of the voting shares. The designated shareholder rules may apply at any time.
Subsection 4900(3)
Administrative Policy
23 September 2003 External T.I. 2003-0035905 F - REG 4900(3)
Regarding the acquisition by a DPSP from a licensed annuity provider of a contract under which the annuity will be payable to the employee beneficiary of the DPSP no later than age 69 and is not guaranteed for more than 15 years, CCRA indicated that was permissible for the employee to directly designate a beneficiary in the annuity contract as to the event of the employee’s death.
Subsection 4900(4)
Cases
Millward v. The Queen, 86 DTC 6538, [1986] 2 CTC 423 (FCTD)
A company owned by the taxpayer mortgaged land in favour of an RRSP of the taxpayer's partner ("Coates") in his law firm and a company owned by Coates and his wife mortgaged land in favour of the taxpayer's RRSP. The mortgages were for the same term and amount, and bore less than a commercial rate of interest. The taxpayer in accepting the land of Coates' company as security relied on Coates' assertion that it constituted adequate security, without further investigation.
Due to the reciprocal nature of the transaction, it was not governed by market factors and was instead governed by the common interest of the taxpayer and Coates. They accordingly did not deal at arm's length and the mortgage was not a qualified investment.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 251 - Subsection 251(1) - Paragraph 251(1)(c) | acting in concert where mutual back scratching | 132 |
The Queen v. Epstein, 84 DTC 6259, [1984] CTC 270 (FCTD)
It was held that the word "mortgagor" in an ancestor of regulation 4900(4) should be taken to refer only to the person who first grants the mortgage, rather than also to an assignee of the mortgagor. It was stated that this regulation was "a means to prevent an original mortgagor who is not dealing with the mortgagee at arm's length from granting an improvident mortgage on business or investment property at an excessive rate of interest".
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Statutory Interpretation - Interpretation Act - Section 17 | 23 |
Administrative Policy
19 September 1996 External T.I. 9629885 - RRSP MORTGAGE ON LEASEHOLD INTEREST
Where a building built by a lessee on land situate in Canada qualifies as a leasehold interest or other real property, rather than as a chattel, RC is prepared to accept that a mortgage granted by the lessee in respect of its leasehold interest will be a qualified investment for an RRSP if the other requirements of Regulation 4900(4) are satisfied.
21 July 1995 External T.I. 9516095 - NON-RECOURSE MORTGAGE
A non-recourse mortgage secured by real property is considered a mortgage for purposes of Regulation 4900(4).
8 February 1994 External T.I. 9400195 - RRSP - MORTGAGE AS QUALIFIED INVESTMENT
A mortgage will be a qualified investment for an RRSP where the annuitant is a member of a church and the church is the mortgagor, provided that the annuitant deals at arm's length with the church (or the mortgage qualifies under Regulation 4900(1)(j)). Where the parties deal at arm's length, there is no particular requirement respecting the timing and amount of interest payments on the mortgage.
26 November 1992 T.I. 923059 (September 1993 Access Letter, p. 422, ¶C144-237)
An investment of an RRSP in a fund that invested only in mortgages, where there was no evidence that the fund would hold the mortgages as nominee or agent for the RRSP, would not be a qualified investment.
8 February 1991 T.I. (Tax Window, Prelim. No. 3, p. 22, ¶1118)
The greater the difference between the relevant commercial interest rate at the time of a mortgage loan and the interest rate offered, the more likely the participation payments on the mortgage will be considered equity payments as opposed to interest payments, in which case the participating mortgage will not be a qualified investment.
11 January 1991 T.I. (Tax Window, Prelim. No. 3, p. 22, ¶1089)
Where an RRSP becomes a mortgagee in possession and is required to make expenditures to maintain the property, if such payments are added to the principal of the mortgage and bear interest they are part of the mortgage loan and are therefore eligible investments.
Subsection 4900(6)
Administrative Policy
18 April 1990 T.I. (September 1990 Access Letter, ¶1430)
Re eligibility of the shares of a Quebec business investment company.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - General Concepts - Fair Market Value - Shares | 51 |
2 November 89 T.I. (April 1990 Access Letter, ¶1191)
A person's dual status as both an employee and a shareholder of a corporation will not by itself cause the share to lose its status as a qualified investment. In order for s. 4900(8) to apply, it must be reasonable to consider that an amount received in respect of the share is on account of, and lieu of, or in satisfaction of payment for services provided by the employee-shareholder. This will be a question of fact.
Subsection 4900(8)
Administrative Policy
23 May 2001 External T.I. 2001-0077855 F - PLACEMENT ADMISSIBLE REER
A share issued to a person in payment for services rendered in connection with the incorporation of the company was not subject to Regs. 4900(8) and (13), as those provisions refer to an amount received in respect of a share issued.
Subsection 4900(12)
Administrative Policy
2001 Ruling 2001-0070523 - REAL ESTATE DEVELOPMENT ACTIVE BUSINESS
Shares of a corporation that was in the process of developing a parcel of land into a retirement community with a view to selling homes and apartments to individuals who would be interested in living in the retirement community, would qualify under Regulation 4900(12)(a).
Income Tax Technical News, No. 9, 10 February 1997
Where two unrelated shareholders each own 50% of the shares of a corporation, the fact that they used their own RRSPs to acquire shares of the corporation is not by itself an indication that they do not deal at arm's length with the corporation immediately after the acquisition, even though the corporation will be controlled by the group consisting of the two shareholders since they generally would act in concert.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Other Legislation/Constitution - Federal - Indian Act - Section 87 | 30 | |
| Tax Topics - Income Tax Act - Section 212 - Subsection 212(1) - Subparagraph 212(1)(b)(vii) | events must be beyond borrower's control | 79 |
| Tax Topics - Income Tax Act - Section 245 - Subsection 245(4) | loss transfer must be to affiliated person - related not enough | 50 |
| Tax Topics - Income Tax Act - Section 251 - Subsection 251(1) - Paragraph 251(1)(c) | 71 | |
| Tax Topics - Income Tax Act - Section 88 - Subsection 88(1) - Paragraph 88(1)(c.3) - Subparagraph 88(1)(c.3)(ii) | 159 | |
| Tax Topics - Income Tax Act - Section 53 - Subsection 53(1) - Paragraph 53(1)(e) - Subparagraph 53(1)(e)(i) | avoidance of double taxation through absence of ACB adjustment | 137 |
Subsection 4900(13)
Administrative Policy
11 October 1996 APFF Roundtable, 7M12910 - APFF ROUND TABLE
One cannot conclude simply from the fact that a start-up corporation pays little salary to an individual who is a beneficiary of an RRSP holding dividend-paying shares of the corporation that Regulation 4900(13) applies. However, such an inference might be made where employees performing similar tasks but not holding shares through their RRSPs are better paid.
Subsection 4900(14)
Administrative Policy
3 January 2002 External T.I. 2001-0109425 F - REER TITE D'UNE SOCIETE EN FAILLITE
Regarding whether a taxpayer can keep a security of a bankrupt corporation in the taxpayer’s RRSP, CCRA stated:
Where the security is a share of the capital stock of a private corporation and constitutes a qualified investment by virtue of subsection 4900(12) of the Income Tax Regulations, the share will continue to be a qualified investment after the bankruptcy of the corporation since the qualification of such a share as a qualified investment is established at the time the trust acquires the security.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Regulations - Regulation 4900 - Subsection 4900(1) - Paragraph 4900(1)(b) | share of now-bankrupt corporation can continue to be held by RRSP | 99 |
Paragraph 4900(14)(a)
Subparagraph 4900(14)(a)(iii)
Administrative Policy
14 October 2009 External T.I. 2009-0325101E5 F - Placement admissible, part de coopérative
CRA indicated that both of the conditions of the definition of "qualifying share" in Reg. 4901(2)(a) and (b) need not be satisfied in order for a co-operative share to be a qualified investment.
Subsection 4900(15)
Administrative Policy
22 November 2012 External T.I. 2012-0441781E5 F - Prohibited Investment - Cooperative
Respecting whether shares of a co-operative corporation may be prohibited investments under s. 207.01(1)(d) of the definition "prohibited investment," CRA stated:
[S]ection 5001 of the Regulations clarifies that property that is a qualified investment because of subsection 4900(14) is prescribed property for the trust at any time if, at that time, it is not described in any of subparagraphs 4900(14)(a)(i) to (iii). This could be the case where a cooperative share qualifies as a qualified investment at the time it was acquired by the trust and after that acquisition, the cooperative ceases to be a specified cooperative corporation within the meaning of subsection 4901(2) of the Regulations.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Shareholder | investor in cooperative holds shares and is shareholder | 181 |
| Tax Topics - Income Tax Act - Section 207.01 - Subsection 207.01(1) - Prohibited Investment - Paragraph (b) - Subparagraph (b)(i) | share of cooperative can be a share of corporation for prohibited investment purposes | 71 |