| 5-922303 | |
| M.P. Baldwin | |
| (613) 957-8953 |
24(1)
Attention: 19(1)
September 17, 1992
Dear Sirs:
Re: Eligibility of Investments for Registered Retirement Savings Plans ("RRSP")
This is in reply to your letter of July 29, 1992 requesting a technical interpretation with respect to the investment in small businesses through RRSPs and more specifically the definition of designated shareholders pursuant to section 4901(2) of the Income Tax Regulations (the "Regulations")
As noted 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 request. As a consequence thereof, we may only offer the following general comments.
A designated shareholder of a corporation is any person who
(a) is, or is related to, a person who separately or together with any other related persons holds 10% or more of the shares of any class of shares of the corporation, unless the cost amount of those shares is, in total, less than $25,000. For this purpose, an annuitant of an RRSP and the RRSP itself are considered to be related persons,
(b) is or is related to a member of a partnership that controls the corporation in any manner,
(c) is or is related to a beneficiary under a trust that controls the corporation in any manner,
(d) is or is related to an employee of the corporation where the employees control the corporation, except where the corporation is controlled by one person or a related group of persons, or
(e) does not deal at arm's length with the corporation.
To determine whether or not an annuitant is a designated shareholder is question of fact that can only be determined by reviewing all the facts in a particular situation.
We trust that the above comments will be of assistance to you.
Yours truly,
for DirectorFinancial Industries DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch