| 5-912611 | |
| D.S. Delorey | |
| 24(1) | (613) 957-8953 |
Attention: 19(1)
February 3, 1992
Dear Sirs:
This is in reply to your letter of August 27, 1991 concerning paragraph 4901(2)(d) of the Income Tax Regulations (the "Regulations").
In your letter, you set out certain facts concerning the ownership of shares of related companies and ask if shares of one of the companies (e.g., Opco), which are owned by a particular employee of one of the other companies (e.g., A Corp), would represent a qualified investment for a registered retirement savings plan ("RRSP") of which the employee is an annuitant. More particularly, because two other employees of A Corp indirectly control Opco, you are concerned that paragraph 4901(2)(d) of the Regulations would apply such that the shares of Opco would not be a qualified investment for a trust governed by an RRSP of which an employee of A Corp (or a person related to that employee) is the annuitant.
Written confirmation of how a provision of the Regulations will be interpreted with respect to a particular set of facts is normally given by this Directorate only where the facts relate to transactions that are proposed and are the subject matter of an advance ruling request submitted in the manner set out in Information Circular 70-6R2. Where the facts relate to transactions that are completed, the enquiry should be addressed to the relevant District Taxation Office. The following comments are therefore of a general nature only.
We agree that in the scenario presented in your letter, Mr. C would be a designated shareholder of Opco by virtue of paragraph 4901(2)(d) of the Regulations. Consequently, since paragraph 4901(2)(d) does not provide for any exceptions, the shares of Opco would not be a qualified investment for a trust governed by an RRSP of which Mr. C (or a person related to Mr. C) is the annuitant, notwithstanding that Mr. C's interest in Opco is nominal or that he has little if any influence concerning the management of the operations of Opco.
Our comments reflect 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