18 January 1990 External T.I. 74590 F - Security Transactions and Debt Obligations

SUBJECT:  Security Transactions and Debt Obligations in Bearer Form

We are writing in response to your memorandum of December 15, 1989 in which you requested our comments in the draft information return related to reporting for the above subject.

1.     In the fourth paragraph  of your memorandum it is stated that the definition of security in subsection 230(1) of the Income Tax Regulations (the "Regulations") includes debt obligations.  We note that the definition does not include privately issued debt obligations in bearer form.

2.     Subsection 201(6) of Regulation requires the payer, nominee or agent to report the proceeds of disposition or redemption amount and such other information as required.  Subsection 230(3)  also calls for this type of information.  However, the draft return and information slips and instructions thereto do not mention the redemption amount.  It may be appropriate to insert "OR REDEMPTION AMOUNT" in the following places:

(a)       Following "PROCEEDS OF DISPOSITION" on lines 1, 2 and 3 in the first reporting box; and

(b)       in box 7 of the TXXXX(1) and (2) Supplementaries

     Alternatively, "redemption amount" could be referred to in "Box 7" of the Payer Instructions.

3.     We believe the word "INDICATOR" has been omitted between the words "NUMBER" and "CODE" in the second line of the Payer Instructions with respect to Box 2.  This change will make the instructions correspond to the description on the information slips.

4.     The words "OR REDEEMED" should be added to the Box 6 description following "DISPOSED OF" in the Payer Instructions.

5.     With respect to the title of the information return, we believe the form title "Return of Security Transactions" is acceptable.

Please contact Clayton Robb at 957-2744 if you have questions concerning the foregoing comments.

DirectorFinancial Industries DivisionRulings Directorate