| 24(1) | 901482/901576 |
| D. Duff | |
| (613) 957-3498 | |
| 19(1) | EACC9701 |
September 4, 1990
Dear Madam:
This is in response to your letters of June 29 and July 12, 1990 regarding the qualification of escrowed and restricted shares as investments for registered retirement savings plans ("RRSPs").
Where escrowed shares comply with subparagraph 204(e)(iv) of the Income Tax Act ("Act"), they are qualified investments for RRSPs for tax purposes. Your concern about the possible problems of an investor transferring such shares to his RRSP is not a tax issue and should be addressed to the applicable securities authorities. For the purposes of the Act, the annuitant and his RRSP trust are separate persons but this may not be the case with the securities authorities.
Shares that are otherwise qualified RRSP investments would normally not become disqualified by a restriction unless the Act makes a specific reference such as in clause 204(e)(iv)(A). If shares of a particular class are listed on a prescribed stock exchange in Canada, they are qualified investments pursuant to subparagraph 204(e)(iv). If some of the shares of this class have a restriction preventing them from being traded for a certain period, it is the Department's position that these restricted shares are included with those listed and thereby qualify under that provision.
The fair market value of escrowed or restricted shares would be a question of fact based on the circumstances at the time of the transfer. For restricted shares, the trading price of shares listed could normally be relied on if the trading price is current and the shares traded are the same and have the same restriction. However, if the restriction relates to trading such that none of the restricted shares are being traded, then the trading price should be adjusted to reflect this. This is briefly addressed in paragraph 6 of Interpretation Bulletin IT-113R3.
We trust the above comments will be of assistance to you.
Yours truly,
for DirectorFinancial Industries DivisionRulings Directorate