Registered Plans Division Financial Industries Division
Attention: Ms Robin Stong
Letter of June 7, 1993 from XXXXXXXXXX
This is in reply to your memorandum of August 9, 1993, enclosing the above-referenced letter and asking us to respond.
We have reviewed the letter and note that XXXXXXXXXX only concern is the application of paragraph 8502(g) of the Income Tax Act Regulations (the "Regulations"). It is assumed for purposes of the query that the investment in the U.S. "common trust fund" complies with the permitted investment rules (Regulation 8502(h)) and that the foreign property limits are respected.
Regulation 8502(g) states that the arrangement under which the pension plan's property is held must be acceptable to the Minister. As the application of this registration requirement involves an administrative decision and not a technical interpretation of the law, we are unable to assist you. We, therefore, are returning the letter to you for your action.
Although we are asking you to reply to XXXXXXXXXX we have reviewed his description of the trust relationships and note that it is similar to the ownership of units in a mutual fund. The property in that case is the units and they are held directly by the pension trust. We are not sure what XXXXXXXXXX considers would be of concern to the Department, and tend to agree with the comments in the penultimate paragraph of his letter.
XXXXXXXXXX indicates that the trust relationship between the Canadian trust and the U.S. trust (the "Subordinated Trust") is disregarded for purposes of the U.S. tax law, and under the Internal Revenue Code the Canadian trust is treated as the owner of the shares or units in the common trust fund. Although the manner in which the trust relationship is treated under U.S. law is not determinative of the issue of whether the pension plan property is held in a manner acceptable for purposes of the Income Tax Act, the reason for the U.S. treatment may be relevant. You may wish to request further information about this from XXXXXXXXXX
for DirectorFinancial Industries DivisionRulings Directorate