5-911423
Dear Madam:
Re: 24(1)
This is in reply to your letter of May 16, 1991, concerning the above-noted topic.
As indicated in Information Circular 70-6R2, we do not express opinions on specific proposed transactions other than as a reply to an advance income tax ruling. As a consequence thereof, we may only offer the following general comments.
We have not examined the prospectuses submitted with your letter and make no comment on them, however, it is our opinion that the two warrants that you refer to in your letter are not qualified investments for either an RRSP or an RRIF except in respect of a particular time, if any, when it can be clearly established that cash would be realized if the warrants were exercised at that time.
Accordingly, if the warrants would not give rise to cash if they were exercised on the day they were acquired, subsection 146(10) of the Income Tax Act (the "Act") in the case of RRSPs and subsection 146.3(7) of the Act in the case of RRIFs, would apply to require an income inclusion in the hands of the plan annuitant. If it is established that an investment is a qualified investment at the time of its acquisition but it subsequently becomes an ineligible investment and the plan, continues to hold it at the end of any month thereafter, a tax under Part XI.1 of the Act would be payable by the plan.
We regret that our reply could not be favourable.
Yours truly,
for DirectorFinancial Industries DivisionRulings Directorate