G. Kauppinen (613) 995-0051
April 18, 1986
Dear Sirs:
Re: Non-Qualified Investments for Registered Retirement Savings Plans Effect of Paragraph 89(1)(g)
This is in reply to your letter dated January 27, 1986 regarding the effect of paragraph 89(1)(g) of the Income Tax Act ("Act") with respect to the definition of nonqualified investments for registered retirement savings plans.
Specifically you have posed the following question. Will shares of a corporation be a qualified investment of an RRSP if, at the time of acquisition by the RRSP, the corporation is not a "public corporation" as defined in paragraph 89(1)(g) of the Act, but subsequently becomes a public corporation before the time it has to file its tax return for its first taxation year and hence, on election, would be deemed retroactively to be a 'public corporation' from the date of its incorporation?
Based on your reading of Regulation 4900 and subparagraph 146(1)(g)(iv) of the Act, it is your opinion that the shares of the corporation would be a qualified investment for the RRSP even though, at the time of the acquisition by the RRSP, the shares were not a 'qualified investment' as defined in paragraph 146(1)(g) of the Act.
Regulation 4900 states at paragraph 4900(1)(b) therein that for the purposes of subparagraph 146(1)(g)(iv) a qualified investment for an RRSP at a particular time will include a share of the capital stock of a public corporation.
In our opinion, the corporation must be a public corporation at the time the RRSP acquired the shares for them to be a qualified investment. Although a corporation will be deemed to be a public corporation from the commencement of the year in which an election is made any shares acquired prior to the date of election will not be qualified investments.
We trust this is of assistance.
Yours very truly,
for Director Financial Industries Division Rulings Directorate Legislative and Intergovernmental Affairs Branch
GK/ldb