2 June 2003 Ministerial Correspondence 2003-0016804 - INVESTMENT HELD BY AN RRSP

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CCRA.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.

Principal Issues:

Follow up reply to 2003-000907 XXXXXXXXXX

Taxation of corporate securities held in an RRSP after corporation is bankrupt or reorganized.

Position:

Limited explanation of the tax law was provided based on information available on the web pertaining to the particular corporation.

Reasons:

XXXXXXXXXX

Signed on June 2, 2003

XXXXXXXXXX

Dear XXXXXXXXXX:

The Honourable Elinor Caplan, Minister of National Revenue, has asked me to reply to your facsimile received on May 5, 2003, concerning the taxation of excess foreign property or non-qualified property held in a registered retirement savings plan (RRSP).

XXXXXXXXXX. The XXXXXXXXXX. letter also indicated that, according to the Canada Customs and Revenue Agency (CCRA), unless the shares have been removed from the account or cancelled by the corporation, the shares in a bankrupt company are not deemed to be disposed of by reason of the bankruptcy.

To add some clarification, the CCRA's position is that shares of a corporation are not cancelled merely because a corporation has filed for bankruptcy and that the shares will continue to exist until the shares are, in fact, cancelled and that this will generally occur when the corporation surrenders its charter.

In my previous letter to you of April 11, 2003, concerning the same issue, I noted that the court order confirming the corporation's plan of reorganization was provided on XXXXXXXXXX, and that the cancellation of the shares under that order was effective on that date. However, I now understand that the effective date was established after the order was issued and that according to additional information obtained on the Internet, the effective date was XXXXXXXXXX. Accordingly, the summary of the information that I provided in my previous letter should read as follows:

? the shares were foreign property within your RRSP until XXXXXXXXXX, and would be subject to the tax on excess foreign property to the extent that the cost amount of all of the foreign property exceeded the foreign property limit of the RRSP;

? the shares were a non-qualified investment within your RRSP from XXXXXXXXXX, until XXXXXXXXXX, and the tax for holding non-qualified investments would be charged to your RRSP for that period; and

? as of XXXXXXXXXX, your RRSP did not hold the shares (as they had been cancelled) and, subsequently, would no longer be liable for either the excess foreign property tax or the tax on holding non-qualified investments with respect to the shares.

However, as I previously indicated, this summary is based on information concerning the shares of XXXXXXXXXX. that is available to the public on the Internet, and it may or may not be complete. Accordingly, since there appears to be some concerns with respect to its accuracy, it may be necessary for the courts to make a final determination should you and XXXXXXXXXX. not be able to reach any agreement on the matter. It is not a matter on which the Canada Customs and Revenue Agency (CCRA) would be able to intercede.

Should you wish further clarification of these matters, I again invite you to contact Mr. Wayne Harding of the Income Tax Rulings Directorate, by writing to 16th Floor, Tower A, Place de Ville, 320 Queen Street, Ottawa ON K1A 0L5, or by calling 0-613-957-8953 collect.

I trust that these comments will be helpful.

							Yours sincerely,

							Bill McCloskey
							Assistant Commissioner
							Policy and Legislation Branch

Wayne Harding
957-9769
May 16, 2003
2003-001680