| 24(1) | File No. 5-9036 |
| A.B. Adler | |
| (613) 957-8962 |
November 27, 1989
Dear Sirs:
This is in reply to your letter of November 2, 1989 in which you requested clarification of the application of subsection 206(2) of the Income Tax Act ("Act") in specific circumstances.
In your example property (including U.S. shares) of an RRSP is transferred from one trustee to another, presumably under subsection 146(16) of the Act. Although, at the time of their original acquisition the cost amount of the U.S. shares did not exceed the 10% threshold in subsection 206(2) of the Act, the fair market value of the U.S. shares at the time of the transfer would exceed 10% of the RRSP's total value.
It is our view that the transfer of property of a self-administered RRSP from one trustee to another pursuant to subsection 146(16) of the Act does not result in the creation of a new trust. As a consequence there is no disposition of trust property in such a situation and accordingly, the cost amounts of the transferred property in the hands of the second trustee would remain unchanged for the purposes of the valuation of foreign property under subsection 206(2) of the Act.
Also, for your information, "cost amount" is defined in subsection 248(1) of the Act to mean where the property is capital property, its adjusted cost base to the taxpayer at a particular time, and accordingly the cost amount may change over time.
This opinion is based on our understanding of the law as it applies generally. It is not, however, an income tax ruling and is therefore not binding upon the Department.
We trust that our comments will be of assistance to you.
Yours truly,
for DirectorFinancial Industries DivisionRulings Directorate