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Attention: XXXX
G. Kauppinen (613)957-3495
December 18, 1987
Dear Sirs:
This is in reply to your letter dated November 16, 1987 and further to ours dated April 14, 1987 regarding investments by self-directed RRSPs in Eurobonds.
Specifically you have requested our opinion as to whether Eurobonds would be considered foreign property for the purposes of the 10% limitation contained in subsection 206(2) of the Income Tax Act ("Act").
Pursuant to the definition in paragraph 206(2)(g) of the Act, "foreign property" generally includes any bond issued by a person, corporation or trust not resident in Canada. In our opinion, if the Eurobonds are debt obligations of a resident of Canada, such as the Government of Canada, a provincial government, a Crown corporation or a corporation resident in Canada, the possibility that the bonds could be physically located in a foreign clearing-house would not, in and by itself, cause the bonds to be foreign property as defined in subsection 206(2) of the Act.
We caution, however, that the investment must be directly in the bond itself and not, for instance, through a trust. An investment in an interest in a trust which holds Eurobonds could constitute an investment in foreign property pursuant to paragraph 206(1)(i) of the Act.
We trust the foregoing is of assistance.
Yours truly,
for Director Financial Industries Division Rulings Directorate