Principal Issues: [TaxInterpretations translation] Do both of the conditions of the definition of "qualifying share" listed in paragraphs 4901(2)(a) and (b) of the Regulations have to be satisfied in order for a co-operative share to be a qualified investment?
Position: No
Reasons: Text of subsection 4901(2) and the November 1994 Department of Finance Explanatory Notes relating to that subsection.
2009-032433 XXXXXXXXXX Catherine Ayotte, Notary, M.Fisc. October 14, 2009
Dear Sir,
Subject: Cooperative shares as qualified investments for an RRSP
This is further to your letter of May 27, 2009, in which you asked for our comments on the eligibility of cooperative shares as qualified investments for an RRSP.
Please note that unless otherwise indicated, all legislative references herein are to the provisions of the Income Tax Act (the "Act"); all references to the "Regulations" are to the Income Tax Regulations.
Subsection 4900(12) of the Regulations provides that a "qualifying share" in respect of a "specified cooperative corporation" is a "qualified investment" for a trust governed by a registered retirement savings plan, a registered education savings plan or a registered retirement income fund if the share so qualifies at the time the trust acquires it and if each person who is an annuitant, a beneficiary or a subscriber under the plan or fund immediately after that time was not a "connected shareholder".
The term "qualifying share" is defined in subsection 4901(2) of the Regulation and specifies that it is a share of a specified cooperative where:
- ownership of the share or a share identical to the share is not a condition of membership in the corporation (a “Qualifying Share”),
- a connected person under the governing plan has not received a payment from the corporation pursuant to an allocation in proportion to patronage in respect of consumer goods or services (an "Allocation in Proportion to Patronage”), and can reasonably be expected not to receive a payment, after the acquisition of the share by the plan trust, from the corporation pursuant to an Allocation in Proportion to Patronage.
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.
The term "consumer goods or services", as defined in subsection 4901(2) of the Regulations, has the meaning assigned by subsection 135(4) and refers to goods or services the cost of which was not deductible by the taxpayer in computing the income from a business or property.
We hope that our comments are of assistance.
Best regards,
Ghislain Martineau
Manager
Financial Sector and Exempt Entities Section
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch