Revenue Canada Taxation Head Office
G. Kauppinen (613) 995-0051
May 27, 1986
Dear Sirs:
This is in reply to your letter dated April 16, 1986 regarding non-qualified investments for deferred income plans and the new regulations in Parts XLIX and LI of the Income Tax Regulations ("Regulations").
You have posed the following question:
"Will a share of a taxable Canadian corporation, which qualifies as a 'small business security' for purposes of Parts XLIX and LI of the Regulations be considered to be a 'non-qualified investment', as defined in paragraph 146(1)(e) of the Income Tax Act ("Act"), if it was transferred to a trust governed by a registered retirement savings plan ("RRSP") after October 31, 1985, the date after which the amendments to Parts XLIX and LI of the Regulations are effective?".
In our opinion, for the purposes of subparagraph 146(l)(g)(iv) of the Act, except as provided in subsection 4900(8) of the Regulations, a property is a qualified investment for a trust governed by a RRSP at any time after October 31, 1985 if at that time the property was a share of an eligible corporation. (within the meaning assigned by subsection 5100(1) of the Regulations), unless the annuitant under the RRSP is a designated share- holder of the corporation. A 'small business security' is defined at subsection 5100(2) of the Regulations and includes property that is a share of the capital stock of an eligible corporation.
This opinion is our best interpretation of the law as it applies generally. It may, however, not always be appropriate in the circumstances of a particular case and, as stated in paragraph 24 of Information Circular 70-6R, it is not binding on this Department.
We trust the foregoing is of assistance.
Yours truly,
for Director
Financial Industries Division Rulings Directorate Legislative and Intergovernmental Affairs Branch