Principal Issues: Will notes issued by a XXXXXXXXXX partnership be a qualified investment for trusts governed by RRSPs, RRIFs, RESPs and DPSPs?
Position: Question of fact, in this particular file yes.
Reasons: Based on the facts, all of the partners are Canadian corporations that if they issued the Notes directly, as opposed to the XXXXXXXXXX partnership issuing the Notes, the Notes would be prescribed as qualified investments in accordance with paragraph 4900(1)(i) of the Income Tax Regulations.
XXXXXXXXXX 2006-021324
XXXXXXXXXX, 2007
Dear XXXXXXXXXX:
Re: Advance Income Tax Ruling Request
XXXXXXXXXX (the "Partnership")
This letter is in reply to your letters dated XXXXXXXXXX, in which you requested an advance income tax ruling on behalf of the above-referenced Partnership and further to your telephone conversations and email exchanges (XXXXXXXXXX).
We understand that, to the best of your knowledge and that of the Partnership and its partners, none of the issues involved in the ruling request is:
(i) in an earlier return of the Partnership, its partners or a related person;
(ii) being considered by a tax services office or tax centre in connection with a previously filed tax return of the Partnership, its partners or a related person;
(iii) under objection by the Partnership, its partners or a related person;
(iv) before the courts; nor,
(v) the subject of a ruling previously issued by the Directorate.
Unless otherwise stated, all references to a statute are to the Income Tax Act R.S.C. 1985 (5th Supp.), c.1, as amended, (the "Act") and all terms and conditions used herein that are defined in the Act have the meaning given in such definition unless otherwise indicated.
Facts
1. The Partnership is a XXXXXXXXXX partnership that carries on the business of XXXXXXXXXX. The partners of the Partnership are:
a) XXXXXXXXXX ("ACo") (Business No. XXXXXXXXXX)
b) XXXXXXXXXX ("BCo") (Business No. XXXXXXXXXX)
c) XXXXXXXXXX ("CCo") (Business No. XXXXXXXXXX)
BCo is XXXXXXXXXX partner of the Partnership. ACo and CCo are XXXXXXXXXX partners of the Partnership. ACo, BCo and CCo are all "Canadian corporations" as defined in subsection 248(1) of the Act. Units of the Partnership are not listed on any stock exchange.
2. ACo is a corporation referred to in subparagraph 4900(1)(i)(iii) of the Income Tax Regulations (the "Regulations"), i.e., a Canadian corporation that, in respect of its capital stock, has issued and outstanding share capital carried on its books at not less than $XXXXXXXXXX, and has issued and outstanding bonds, debentures, notes or similar obligations having an aggregate principal amount of at least $XXXXXXXXXX and that are held by at least XXXXXXXXXX different persons and were issued by ACo by means of one or more offerings, provided that in respect of each such offering a prospectus, registration statement or similar document was filed with and, where required by law, accepted for filing by a public authority in Canada pursuant to and in accordance with the laws of Canada or a province and there was a lawful distribution to the public of those bonds, debentures, notes or similar obligations in accordance with that document.
3. BCo is controlled by XXXXXXXXXX (the "Fund") and the Fund is a "mutual fund trust", as defined in subsection 132(6) of the Act, whose units are listed on a stock exchange referred to in section 3200 of the Regulations. Accordingly, BCo is a corporation referred to in subparagraph 4900(1)(i)(ii) of the Regulations.
4. CCo is a wholly-owned subsidiary of BCo. Accordingly CCo is also a corporation referred to in subparagraph 4900(1)(i)(ii) of the Regulations.
Proposed Transaction
5. It is proposed that the Partnership will borrow money by issuing notes (the "Notes") to third parties, including trusts governed by registered retirement savings plans (RRSPs), registered education savings plans (RESPs), registered retirement income funds (RRIFs), and deferred profit sharing plans (DPSPs).
Purpose of the Proposed Transaction
6. The purpose of the proposed transaction is to enable the Partnership to borrow additional funds to be used for the purpose of earning income from its business and investments.
Ruling
Provided that the preceding statements constitute a complete and accurate disclosure of all of the relevant facts, proposed transaction and purpose of the proposed transaction, and provided that the proposed transaction is as described above, we rule as follows:
Based on the facts that all partners of the Partnership satisfy and will continue to satisfy paragraph 4900(1)(i) of the Regulations and subject to subsection 4900(2) of the Regulations, the Notes issued by the Partnership, as described in 5 above, will be prescribed as qualified investments for trusts governed by RRSPs, RESPs, RRIFs and DPSPs under subsection 4900(1) of the Regulations.
The above ruling, which is based on the Act in its present form and does not take into account any proposed amendments thereto, is given subject to the general limitations and qualifications set out in Information Circular 70-6R5 dated May 17, 2002, and are binding on the CRA provided that the proposed transactions are completed by XXXXXXXXXX.
Yours truly,
for Director
Financial Sector and Exempt Entities Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch