15 January 2009 External T.I. 2008-0272681E5 F - Options d'achat sur devises
Principal Issues: [TaxInterpretations translation] Are currency call options listed on the Montreal Exchange a qualified investment for a trust governed by an RRSP?
Position: General comments.
Reasons: Such currency call options can be a qualified investment so long as such securities are not futures contracts or other derivative instruments where the risk of loss to the holder may exceed the cost to the holder.
XXXXXXXXXX 2008-027268
Guy Goulet, CA, M.Fisc.
January 15, 2009
Dear Sir,
Subject: Currency call and put options
This is in response to your letter dated March 19, 2008 in which you requested that we confirm the eligibility of call and put options on currencies listed on the Montreal Exchange as a qualified investment for a trust governed by a registered retirement savings plan (RRSP).
Unless otherwise indicated, all legislative references herein are to the provisions of the Income Tax Act (the "Act") and all references to the "Regulations" are to the Income Tax Regulations.
Our Comments
It appears to us that the situation described in your letter could constitute an actual situation involving taxpayers. The Canada Revenue Agency ("CRA") does not generally provide written opinions on proposed transactions otherwise than by way of advance income tax rulings. Furthermore, it is up to the relevant Tax Services Office to determine whether completed transactions have received appropriate tax treatment. We can, however, offer the following general comments which may not apply in full in a particular situation.
The types of investments that are qualified investments for an RRSP trust are described in the definition of "qualified investment" in subsection 146(1). Paragraph (a) of that provision refers to the definition of "qualified investment" in section 204. Paragraph (d) of the definition "qualified investment" in section 204 includes securities that are listed on a "designated stock exchange" other than futures contracts or other derivative instruments in respect of which the holder’s risk of loss may exceed the holder’s cost. The Montreal Exchange is a "designated stock exchange" pursuant to subsection 262(5).
We are of the view that securities, representing currency options listed on the Montreal Exchange, could constitute a qualified investment for a trust governed by an RRSP to the extent that such securities are not futures contracts or other derivative instruments in respect of which the holder’s risk of loss may exceed the holder’s cost.
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.