January 13, 1987
TO: SASKATOON DISTRICT OFFICE
FROM: HEAD OFFICE Rulings Directorate M.S. Lalonde (613) 957-8959
ATTENTION L. Murray PAD
RE: Venture Capital Corporation shares RRSP contribution
This is in reply to your memorandum concerning the above noted subject matter. You have described the following situation.
Several taxpayers have purchased equity shares of venture capital corporations ("the VCC shares") which are presumably eligible for a tax credit pursuant to the Venture Capital Tax Credit Act, Statutes of Saskatchewan. The VCC shares would then be transferred by the purchaser into a self-directed registered retirement savings plan ("RRSP").
Issue
You have asked for our opinion on the following questions. What is considered to be the amount of the RRSP contribution?
1. The purchase price of the VCC shares, or
2. The purchase price less the 30% tax credit.
Our Comment
The fair market value of the VCC shares at the time they are contributed to the RRSP is a question of fact. Accordingly, we are unable to confirm whether the fair market value in the situation described would be either amount 1. or 2. above or some other amount.
In our opinion, the fact that a subsequent purchaser would not be entitled to a tax credit would be a factor which would influence the valuation toward the amount 2. described above. In addition to the extent that the venture capital corporation has a liability, albeit contingent, to pay an amount to Her Majesty the Queen in right of Saskatchewan such amount would affect the fair market value of the VCC shares held by the taxpayer.
We hope our comments are of assistance to you.
Chief Financial Institutions Section Financial Industries Division Rulings Directorate Legislative and Intergovernmental Affairs Branch