XXXXXXXXXX
Attention: XXXXXXXXXX
Dear Sirs:
This is in reply to your letter of November 30, 1992 concerning qualified investments for a registered retirement savings plan ("RRSP").
More particularly, you ask if commercial paper issued by a Canadian corporation is a qualified investment for an RRSP trust. The commercial paper is described by your client as short term negotiable securities issued by corporations directly to investors without financial intermediaries such as banks and trust companies.
Our Comments:
Commercial paper of the type described above issued by a corporation will be a qualified investment for an RRSP trust under the following circumstances:
(a) Subparagraph 146(1)(g)(ii) of the Income Tax Act provides that a qualified investment for an RRSP trust includes a bond, debenture, note or similar obligation of a corporation the shares of which are listed on a prescribed stock exchange in Canada. A prescribed stock exchange in Canada is one referred to in section 3200 of the Income Tax Regulations (the "Regulations").
Accordingly, if shares of the corporation issuing the type of commercial paper described above are listed on a stock exchange referred to in section 3200 of the Regulations, the commercial paper would be a qualified investment for an RRSP trust.
(b) Paragraph 4900(1)(i) of the Regulations provides that a bond, debenture, note or similar obligation of a Canadian corporation will be a qualified investment for an RRSP trust where one of the requirements in subparagraphs 4900(1)(i)(i), (ii) or (iii) are met.
Accordingly, where one of those requirements are met, commercial paper of the type described above issued by a Canadian corporation would be a qualified investment for an RRSP. A "Canadian corporation" at any time is described in paragraph 89(1)(a) to mean a corporation that was resident in Canada at that time and was
(i) incorporated in Canada, or
(ii) resident in Canada throughout the period commencing June 18, 1971 and ending at that time.
(c) In Information Release #93-005 dated February 4, 1993, the Department of Finance set out draft amendments concerning qualified investments for RRSPs. If the draft amendment to include paragraph 4900(1)(c.1) of the Regulations is enacted as proposed, a bond, debenture, note or similar obligation of a public corporation (other than a mortgage investment corporation) will be a qualified investment for an RRSP.
Accordingly, commercial paper of the type described above issued by such a public corporation would be a qualified investment for an RRSP if the draft amendment is enacted as proposed. A "public corporation" is defined in paragraph 89(1)(g) of the Act. As stated in paragraph 5 of Interpretation Bulletin IT-320R2, a corporation that is not otherwise a public corporation and that complies with all the conditions prescribed by subsection 4800(1) of the Regulations may elect to be a public corporation. The election is made by filing completed form T2073 with the relevant District Taxation Office.
We wish to point out that commercial paper that is a banker's acceptance is not presently a qualified investment for an RRSP. However, in the draft amendments referred to above, it is proposed to add the following paragraph to subsection 4900(1) of the Regulations:
"(i.1) indebtedness of a Canadian corporation represented by a bankers' acceptance (other than a corporation that does not deal at arm's length with a person who is an annuitant, a beneficiary or an employer, as the case may be, under the governing plan of the plan trust)".
For this purpose, a "Canadian corporation" would have the meaning referred to in (b) above.
Our comments are an expression of opinion only and are not binding on the Department as explained in paragraph 21 of Information Circular 70- 6R2. We trust, however, that they are of assistance.
Yours truly,
for DirectorFinancial Industries DivisionRulings Directorate