Principal Issues: [TaxInterpretations translation] When does an RRSP trust acquire a non-qualified investment where that investment is a share subscribed for by the trust but not paid for.
Position: Reference must be made to the law applicable to the contractual relations between the parties. The fact that the share is subscribed for and not paid for does not affect the timing of the acquisition.
Reasons: There is no definition of acquisition in the Act.
2009-033568 XXXXXXXXXX Catherine Ayotte, Notary, M.Fisc. November 27, 2009
Dear Sir,
Re: Concept of acquisition for the purposes of subsection 146(10)
This is further to your letter dated July 29, 2009, in which you asked our opinion regarding the timing of the acquisition by a trust governed by a registered retirement savings plan (the "trust") of a non-qualified investment that is a share subscribed for by the trust but not paid for ("non-paid-up share") of a private corporation incorporated under Part 1A of the Quebec Companies Act, R.S.Q. C-38.
Please note that unless otherwise indicated, all legislative references herein are to the provisions of the Income Tax Act (the "Act").
It appears to us that the situation described in your letter may constitute an actual situation involving taxpayers. As explained in Information Circular 70-6R5, it is not the practice of the Directorate to comment on proposed transactions involving specific taxpayers otherwise than in the form of an advance income tax ruling. If your situation involves a specific taxpayer and a completed transaction, you should provide all relevant facts and documentation to the appropriate Tax Services Office for its views. However, we are prepared to provide the following general comments.
The Act does not contain a definition of the expression acquisition. In order to determine the meaning of acquisition, reference must be made to the law applicable to the contractual relationship between the parties. For the purposes of subsection 146(10), the mere fact that a subscribed-for share is a non-paid-up share generally does not affect the time at which a trust acquires the share. In our view, a trust generally acquires a non-paid-up share at the time it owns it under the applicable law, which normally occurs when the share is issued and the subscriber is so notified.
We hope you will find our comments of assistance.
Best regards,
Ghislain Martineau
Manager
Financial Sector and Exempt Entities Section
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch.