Principal Issues: Can an RRSP trust hold a put option?
Position: Under the current legislation, a put option would constitute a non-qualified investment for an RRSP. However, proposed new paragraph 4900(1)(e.01) provides that call or put options listed on a prescribed stock exchange will be qualified investments.
Reasons: A put option provides the holder with the right to dispose of, rather than acquire, property, thus it does not meet the requirements of existing paragraph 4900(1)(e).
Signed on May 18, 2005
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Dear Colleague:
Thank you for your letter of March 8, 2005, regarding the consideration of a put option as a qualified investment for a registered retirement savings plan (RRSP).
The Canada Revenue Agency is responsible for administering and enforcing the Income Tax Act and the Income Tax Regulations as enacted by Parliament. Any proposed changes to tax policy or amendments to legislation would have to be considered by the Department of Finance and proposed by the Minister of Finance for approval by Parliament.
I am pleased to inform you that on February 27, 2004, the Department of Finance announced proposed legislation that if passed will allow RRSPs and other deferred income plans to acquire publicly listed put options. Proposed new paragraph 4900(1)(e.01) of the Regulations provides that a call or put option that is acquired after February 27, 2004, and is listed on a prescribed stock exchange in or outside of Canada, will be a qualified investment, provided that the underlying property is a qualified investment. The prescribed stock exchanges are listed in sections 3200 and 3201 of the Regulations.
I trust that the above information will be helpful.
Yours sincerely,
The Honourable John McCallum, P.C., M.P.
c.c.: Minister's Office
Political Assistant