| 19(1) | File No. 5-9163 |
| D. Duff | |
| (613) 957-3498 |
February 21, 1990
Dear Sirs:
Re: 24(1)
Your letter of November 1, 1989 to Revenue Canada, Deferred Income Plans and Trust, was referred to this office for reply. You requested an opinion on the eligibility of the above-noted security for a registered retirement savings plan (RRSP).
The Department cannot provide assurance that these debentures would be qualified investments of an RRSP as this can only be decided on the basis of the facts as determined at the time of acquisition of the debentures. As a consequence thereof we will only offer the following general comments.
Debentures issued by a corporation are qualified investments for a RRSP pursuant to paragraph 146(1)(g) of the Income Tax Act if the shares of the issuing corporation are traded on a prescribed stock exchange in Canada. Where this condition is not met, paragraph 4900(1) (i) of the Income Tax Regulations prescribes debentures issued by a Canadian corporation to be qualified investments if a corporation whose shares are listed on a prescribed stock exchange in Canada either guarantees the principle and interest of the debenture or controls the corporation issuing the debenture.
Where the debentures do not qualify under the rules referred to above, they may qualify under subparagraph 4900(1)(i)(iii) of the Income Tax Regulations if, at the time the debentures were acquired, the issuing Canadian corporation had at least $10,000,000 in issued and outstanding bonds or similar obligations. In addition, the bonds must be held by at least 300 different persons, issued by means of a prospectus filed and accepted by a public authority in Canada and distributed in accordance with the prospectus. The corporation can also meet the criteria of having $25,000,000 in issued and outstanding stock if it is controlled by such a corporation.
A Canadian corporation is defined under paragraph 89(1)(a) of the Income Tax Act (the Act) to be a corporation resident in Canada that was either incorporated in Canada or resident continuously since June 18, 1971.
In addition, a trust governed by an RRSP is liable for a tax under subsection 206(2) of the Act when, at the end of any month, the aggregate cost amounts of foreign properties exceeds a specified proportion of the cost amounts of foreign properties in the trust. Under paragraph 206(1)(d) of the Act a foreign property includes any share of the capital stock of a corporation other than a Canadian corporation and under paragraph 20691)(f) it includes any property exchangeable for a foreign property. Accordingly, these debentures would be considered to be a foreign property if they are exchangeable for shares of a non-Canadian corporation.
We trust these comments will be of assistance to you.
Yours truly,
for DirectorFinancial Industries DivisionRulings Directorate