| 24(1) | 5-900843 |
| D.S. Delorey | |
| (613) 957-3495 | |
| Attention: 19(1) | EACC9377 |
July 27, 1990
Dear Sirs:
Re: Pooled Fund Trusts Insurance Contracts
This is in reply to your letter of May 10, 1990 concerning your suggestion to the trustee of a pooled fund trust that the trust acquire an insurance contract representing ownership of a share in a pooled fund(s) of 24(1)
We note that your query relates to a factual situation involving specific taxpayers and that you have requested a "ruling" with respect thereto. As explained in Information Circular 70-6R (copy enclosed), the Department does not provide rulings other than in reply to advance ruling requests submitted in the manner set out in that Circular. We nevertheless offer the following general comments on the points raised on page 2 of your letter.
It is a question of fact whether or not a particular investment is a marketable security. Generally speaking, it is our view that for the purpose of section 5000 of the Income Tax Regulations (the "Regulations"),
(a) the term "marketable securities" contained in clause 5000(7)(a)(i)(A) of the Regulations refers generally to a security that is capable of reasonably prompt conversion into cash and that is easily traded because a ready market exists and there are no legal or other impediments to the trade, and
(b) we would expect that an insurance contract representing ownership of a share in a pooled fund(s) of an insurance company
(i) would generally not be marketable security, notwithstanding that it is redeemable for cash at any time by either party, and
(ii) would generally not be a type of property described in clause 5000(7)(a)(i)(A) of the Regulations, notwithstanding that the assets of the fund consist solely of a type of property described in that clause.
Thus, a trust that holds such insurance contracts may not meet the requirements set out in the definition of "pooled fund trust" in subsection 5000(7) of the Regulations.
We trust our comments are of assistance.
Yours truly,
for DirectorFinancial Industries DivisionRulings Directorate