XXXX
T.D. Peters (613) 957-3499
Attention: XXXX
October 31, 1986
Dear Sirs:
This is in reply to your letter of September 4, 1986 requesting our view as to whether a term deposit issued in XXXX is a qualified investment for a self-administered registered retirement savings plan ("RRSP").
Since the term "term deposit" is not defined in and for the purposes of the Income Tax Act (the "Act"), it is a question of fact in each case whether a particular term deposit is a bond, debenture, mortgage, hypothec, note or similar obligation. As no documentation accompanied your request we are unable to answer your question directly however we offer the following comments with respect to such a determination.
We generally look to the redeemability and negotiability of the instrument to determine what it represents. Where they are non-negotiable and are redeemable without capital penalty at any time before maturity our position is these instruments represent cash or money. If they are negotiable and carry penalties for early redemption, however, we would consider them to be in the nature of a bond, debenture, note or similar obligation. Where the former determination is made, the instrument would not be a qualified investment for a RRSP, however when the latter determination results, the instrument is a qualified investment for a RRSP.
We would also point out that a Canadian bank's bond, debenture, mortgage, hypothec, note or similar obligation denominated in a foreign currency, even if issued through a branch of the Canadian bank, would not constitute foreign property within the meaning assigned to that expression by subsection 206(1) of the Act.
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 the Department.
While not able to answer your specific question we trust these comments will be of assistance to you in determination of the nature of the term deposits in question for purposes of the Act.
Yours truly,
for Director Financial Industries Division Rulings Directorate Legislative and Intergovernmental Affairs Branch