| 19(1) | File No. 5-8203 |
| A.B. Adler | |
| (613) 957-8962 |
June 29, 1989
Dear Sirs:
This is in reply to your letter of June 8, 1989, in which you requested our views whether a particular insurance contract would constitute a qualified investment for RRSP purposes if held by a registered investment.
As indicated in our Interpretation Bulletin IT-408R, paragraph 2., (copy enclosed) a life insurance policy may not be a qualified investment for an RRSP. However, as suggested by you, in certain cases subsection 198(6) of the Income Tax Act (the "Act) may deem the acquisition of an interest in or the payment of an amount under a life insurance policy by an RRSP not to be the acquisition of a non-qualified investment. The conditions to be met are set out in paragraphs 198(6)(c), (d) and (e) of the Act and where they are met the sanctions otherwise applicable to the acquisition of an non-qualified investment by an RRSP under subsection 146(10) of the Act do not apply.
In our view these rules technically would not apply in your case by reason by the combined application of paragraph 204.4(2)(d) of the Act and subsection 4901 (1) of the Income Tax Regulations ("Regulations").
Subsection 4901(1) of the Regulations requires that a "prescribed investment" for a registered investment be a property that is a qualified investment for e.g. an RRSP. Since a life insurance policy may not be qualified investment for an RRSP it also cannot be a prescribed investment for a registered investment for purposes of paragraph 204.4(2)(d) of the Act.
We trust that our comments will be of assistance to you.
Yours truly,
for Director Financial Industries Division Rulings Directorate