19 April 1990 Income Tax Severed Letter ACC9167 - Securities Lending Arrangement

900322
                19(1)                        M. Shea-Derosiers
                                             (613) 957-8953

April 19, 1990

Dear Sirs:

Re: "Securities lending arrangement" Subsection 260(1) of Bill c-28

This is in reply to your letter of March 29, 1990 concerning the above-mentioned subject.

You request our opinion as to whether the lending of qualified securities by unit trusts, mutual fund trusts, pooled fund trusts, registered retirement savings plans ("RRSPs") pursuant to an arrangement defined as a "securities lending arrangement" as defined in subsection 260(1) of Bill C-28 constitutes the investment of funds.

It is our opinion that, in general, the lending of securities (and the normal fee income in respect of such an arrangement) will constitute an undertaking that is the investing of funds of the trust within the meaning of paragraphs 108(2)(b), and 132(6)(b) of the Act and paragraph 5000(7)(b) of the Income Tax Regulations.

You also ask whether an RRSP or a RRIF which lends securities pursuant to a "securities lending arrangement" would be viewed as carrying on a business. We cannot answer your question since the matter of whether or not a taxpayer is merely investing funds or is carrying on a business of investing funds is a question of fact and each case would need to be considered on an individual basis.

The above comments are an expression of opinion only and are not binding on the Department, as explained in paragraph 24 of Information Circular IC 70-6R. We trust however that they are of assistance to you.

Yours truly,

for Director Financial Industries Division Rulings Directorate