Revenue Canada Taxation Head Office
R. Nanner (613)957-3494
May 19, 1988
Dear Sirs:
Re: Qualified Investments for Registered Retirement Savings Plans ("RRSP")
We are writing in reply to your letter of April 18, 1988 requesting our comments as to whether the investment described below would be a qualified investment under paragraph 4900(6)(a) and subparagraph 4900(8)(a)(i) of the Income Tax Regulations (the "Regulations").
A corporation that is an "eligible corporation" as defined in subsection 5100(1) of the Regulations wishes to be listed on the Vancouver Stock Exchange. The relevant Securities Act requires that prior to issuing a prospectus related to an issuer's first primary distribution of shares to the public, an issuer must raise a minimum of $100,000 through equity financing. This equity financing is commonly referred to as "seed capital". Invariably, shares of the corporation are not actually issued even though the subscriber has a right to receive a certain number of shares of the corporation. You wish to know whether or not the right to receive shares of an eligible. corporation (where the annuitant of the RRSP is not a designated shareholder of the corporation as defined at subsection 4901(2) of the Regulations) would be a qualified investment for an RRSP pursuant to the aforementioned provisions of the Regulations.
It is our view that the right to receive shares of an eligible corporation is not a qualified investment for a RRSP pursuant to paragraph 146(1)(e) of the Income Tax Act and the above-noted Regulations.
We hope these comments are of assistance to you.
Yours truly,
for Director Financial Industries Division Rulings Directorate