Subsection 4900(1)
Paragraph 4900(1)(b)
Administrative Policy
24 June 1994 T.I. 5-940923 -
Because one of the criteria in s. 131(8)(a) is that the corporation be a public corporation, a share of a mutual fund corporation will be a qualified investment for an RRSP.
23 February 1994 T.I. 5-940225
A corporation can verify its status as a public corporation through the District Office at which it files its returns. Many RRSP trustees will accept such confirmations as evidence of a corporation's shares eligibility for an RRSP.
1 June 1993 T.I. 5-930642 -
Shares represented by an instalment receipt and that are pledged to a seller of shares to secure the obligation of the holder to pay the unpaid purchase price for the share will be a qualified investment provided the shares of the corporation are listed for trading on a prescribed stock exchange.
13 January 1993 T.I. (Tax Window, No. 28, p. 18, ¶2397)
The delisting of a share, the suspension of its trading or the bankruptcy of the corporation will generally not cause the share to become an ineligible investment.
7 April 1992 T.I. (Tax Window, No. 18, p. 18, ¶1867)
Escrowed shares may constitute a qualified investment.
7 November and 19 December 1990 T.I. (Tax Window, Prelim. No. 2, p. 19, ¶1060)
Where shares of a corporation are not qualified at the time of acquisition because the corporation is not a public corporation, they cannot become qualified investments even if the corporation subsequently makes a valid election under s. 89(1)(g). However, where the trust acquire shares on a particular day and sometime during the same day the corporation becomes a public corporation, the shares will be qualified investments.
4 July 1989 T.I. (Dec. 89 Access Letter, ¶1058)
Shares of a class which are not listed on an exchange are qualified investments where shares of another class of the corporation are listed.
Paragraph 4900(1)(d)
Administrative Policy
11 January 2002 T.I. 2001-010674 -
Units from a mutual fund trust's different classes of units will satisfy Regulation 4900(1)(d) even if a particular class does not satisfy the conditions in Regulation 4801.
Paragraph 4900(1)(e)
Administrative Policy
15 March 2010 T.I. 2009-0345001E5
Are subscription receipts issued by a private Canadian corporation qualified investments under Reg. 4900(1)(e) if they entitle the holder to acquire treasury shares of the corporation after they become listed on a designated stock exchange? CRA stated:
[T]his paragraph requires that the underlying property to be acquired by the option, warrant or similar right must be a qualified investment the entire time the subscription receipt is held by the trust governed by an RRSP.
...[T]he underlying properties of the subscription receipts are treasury shares of a corporation which will only be a qualified investment when they become listed on a designated stock exchange. Therefore...until the treasury shares are listed on a designated stock exchange, the subscription receipts would not provide the right to acquire properties that are qualified investments and would not be qualified investments pursuant to paragraph 4900(1)(e)... .
1 August 2007-T.I. 0247291E5 [right under subscription receipt to receive cash]
Are subscription receipts that provide the holder with the right to receive a cash settlement in lieu of delivery of the underlying property, qualified investments? CRA stated:
Generally, money and deposits of money will be considered to be a qualified investment provided the money is legal tender in Canada. Therefore…a subscription receipt would not be precluded from qualifying as a qualified investment under paragraph 4900(1)(e.01) solely because it provides the holder with the right to receive a cash settlement in lieu of delivery of the underlying property.
24 March 1997 T.I. 970578 [special warrant before prospectus cleared]
The underlying property must be a qualified investment throughout the period that the warrant or right is held by the RRSP. Accordingly, where the shares that can be acquired on the exercise of a special warrant will not be qualified investments until a prospectus has been cleared, the special warrants will not be qualified investments until that time.
31 October 1996 T.I. 962433 (C.T.O. "RRSP Options")
Because shares of a corporation listed on a prescribed stock exchange outside of Canada are qualified investments under paragraph (a) of the definition of "qualified investment" in s. 146(1), employees can transfer their options to acquire shares of their parent corporation traded on the New York Stock Exchange to their RRSPs.
30 January 1995 T.I. 943068 (C.T.O. "RRSP Qualified Investments - Puts & Calls")
Index options are not qualified investments for an RRSP except in respect of the particular time, if any, when it can be clearly established that cash will be realized if the options are exercised at that time.
27 October 1994 Memorandum 7-942158
A stock index futures contract is not a qualified investment for a deferred income plan or a prescribed investment for a registered investment.
27 October 1994 T.I. 942710 (C.T.O. "Options as RRSP Qualified Investments")
If the subject of a call option is a qualified investment, the call options is a qualified investment. However, a put option is property which is not a qualified investment.
24 October 1994 T.I. 942630 (C.T.O. "Convertible Debentures as Qualified Investments")
A debenture that is convertible into shares of an eligible corporation or shares of a small business corporation will not qualify under Regulation 4900(1)(e) as a right to acquire a qualified investment.
31 August 1994 T.I. 5-942019 -
TSE 35 index warrants "would not be qualified investments for an RRSP except in respect of a particular time, if any, when it can be clearly established that cash would be realized if the warrants are exercised at that time".
19 May 1993 T.I. (Tax Window, No. 31, p. 5, ¶2512)
A put option is not a qualified investment as it is a right to dispose of, rather than to acquire, a security.
92 C.R. - Q.51
A "poison pill" warrant that cannot be severed from the share to which it relates and that, therefore, cannot itself be listed, will not be a qualified investment. However, this will only be of significance in cases where the poison pill warrant has a value, which is not usually the case.
31 July 1991 T.I. (Tax Window, No. 7, p. 21, ¶1380)
Rights of shareholders to acquire additional shares at a discount in the event of a take-over bid do not meet the requirements of Regulation 4900(1)(e) prior to the occurrence of the take-over bid. If the bid occurs, the right would only qualify if the requirements of Regulation 4900(1)(e) were met at that time.
6 June 1990 T.I. (November 1990 Access Letter, ¶1540)
Nikkei put warrants are not qualified investments because they do not give the owner the right to acquire a qualified investment at all times.
19 April 1990 T.I. (September 1990 Access Letter, ¶1431)
Re eligibility of listed warrants or call options.
Read, "Technical Matters", 89 C.R. p. 783
Where in an issue of shares and warrants, separate trading of the warrants and shares for a period of time, typically thirty days, is prohibited for security law reasons, during such period the warrants are not qualified investments.
Articles
Leslie Morgan, "Warrants, Rights and Options as Qualified Investments", Corporate Finance, Vol. XII, No. 1, 2004, p. 1158.
Paragraph 4900(1)(g)
Administrative Policy
25 June 1991 T.I. and May 1991 Question and Answer (Tax Window, No. 3, p. 23, ¶1225)
Bonus interest paid by a credit union on invested funds which remain in the RRSP will not cause the investment to be non-qualified, nor will a patronage rebate which is paid directly into the plan.
Paragraph 4900(1)(i)
Administrative Policy
12 May 1995 T.I. 951310 ("Registered Charity Debentures for RRSP")
Debentures issued by a non-profit, non-share corporation that are not guaranteed by any third party will not be qualified investments.
11 October 1994 Memorandum 941714 (CTO RRSP Qualified Investment in Debentures") and 13 September 1994 GAAR Committee Report 941714 (CTO "Debt Invested in U.S. as RRSP Qualified Investment")
A debenture from a Canadian subsidiary of a corporation whose shares are listed on the Vancouver Stock Exchange is a qualified investment for an RRSP notwithstanding that the proceeds of the debenture are loaned by the subsidiary to a non-listed foreign corporation.
21 December 1993 T.I. HAA7255-7 (C.T.O. "Interest in a Bond as Qualified Investment for RRSP")
"An 'interest' in a bond or similar obligation that is a qualified investment for an RRSP pursuant to paragraph 4900(1)(i) of the Income Tax Regulations may also be such a qualified investment if the holder of the interest would have the same rights as a direct holder of the bond but for the interposition of an agent or bare trustee".
Paragraph 4900(1)(j)
Administrative Policy
13 July 1994 Memorandum 7-941572 -
Two RRSPs can each hold an interest in a single mortgage provided each interest is owned by the respective RRSP and all of the remaining conditions for holding non-arm's length mortgages in an RRSP, as described in IT-320R2, are met.
7 February 1994 T.I. 5-940061 -
A mortgage on a business property can be a qualified investment for an RRSP even where the mortgagor and the annuitant do not deal at arm's length, if the specific requirements of Regulation 4900(1)(j) are met.
Paragraph 4900(1)(d.1)
Administrative Policy
4 December 2000 T.I. 2000-005436 -
"Since debts of a public corporation that only has one class of shares that trade on a prescribed stock exchange will be a qualified investment under paragraph 4900(1)(c.1) of the Regulations, it must have been intended that debts of a mutual fund trust with one class of units that trade on a prescribed stock exchange will also be a qualified investment under paragraph 4900(1)(d.1) ... ."
Paragraph 4900(1)(p.1)
Articles
D. Louis, "Trick or Treat? - RRSPs and Foreign Index Units", The Estate Planner, No. 46, November 13, 1998, p. 6.
Subsection 4900(2)
designated shareholder
Administrative Policy
22 February 1990 T.I. (July 1990 Access Letter, ¶1337)
Where one of a group of employees owns 49% of the shares of the corporation, another unrelated employee owns 5%, and the remaining voting shares are widely held with no employee owning more than 2% of the shares, all the shareholders/employees will be designated shareholders unless the corporation is factually controlled by the shareholder/employee who owns 49% of the voting shares. The designated shareholder rules may apply at any time.
Subsection 4900(4)
Cases
Millward v. The Queen, 86 DTC 6538, [1986] 2 CTC 423 (FCTD)
A company owned by the taxpayer mortgaged land in favour of an RRSP of the taxpayer's partner ("Coates") in his law firm and a company owned by Coates and his wife mortgaged land in favour of the taxpayer's RRSP. The mortgages were for the same term and amount, and bore less than a commercial rate of interest. The taxpayer in accepting the land of Coates' company as security relied on Coates' assertion that it constituted adequate security, without further investigation.
Due to the reciprocal nature of the transaction, it was not governed by market factors and was instead governed by the common interest of the taxpayer and Coates. They accordingly did not deal at arm's length and the mortgage was not a qualified investment.
The Queen v. Epstein, 84 DTC 6259, [1984] CTC 270 (FCTD)
It was held that the word "mortgagor" in an ancestor of regulation 4900(4) should be taken to refer only to the person who first grants the mortgage, rather than also to an assignee of the mortgagor. It was stated that this regulation was "a means to prevent an original mortgagor who is not dealing with the mortgagee at arm's length from granting an improvident mortgage on business or investment property at an excessive rate of interest".
Administrative Policy
19 September 1996 T.I. 5-962988
Where a building built by a lessee on land situate in Canada qualifies as a leasehold interest or other real property, rather than as a chattel, RC is prepared to accept that a mortgage granted by the lessee in respect of its leasehold interest will be a qualified investment for an RRSP if the other requirements of Regulation 4900(4) are satisfied.
21 July 1995 T.I. 951609 (C.T.O. "Non-Recourse Mortgage")
A non-recourse mortgage secured by real property is considered a mortgage for purposes of Regulation 4900(4).
8 February 1994 T.I. 5-940019 -
A mortgage will be a qualified investment for an RRSP where the annuitant is a member of a church and the church is the mortgagor, provided that the annuitant deals at arm's length with the church (or the mortgage qualifies under Regulation 4900(1)(j)). Where the parties deal at arm's length, there is no particular requirement respecting the timing and amount of interest payments on the mortgage.
26 November 1992 T.I. 923059 (September 1993 Access Letter, p. 422, ¶C144-237)
An investment of an RRSP in a fund that invested only in mortgages, where there was no evidence that the fund would hold the mortgages as nominee or agent for the RRSP, would not be a qualified investment.
8 February 1991 T.I. (Tax Window, Prelim. No. 3, p. 22, ¶1118)
The greater the difference between the relevant commercial interest rate at the time of a mortgage loan and the interest rate offered, the more likely the participation payments on the mortgage will be considered equity payments as opposed to interest payments, in which case the participating mortgage will not be a qualified investment.
11 January 1991 T.I. (Tax Window, Prelim. No. 3, p. 22, ¶1089)
Where an RRSP becomes a mortgagee in possession and is required to make expenditures to maintain the property, if such payments are added to the principal of the mortgage and bear interest they are part of the mortgage loan and are therefore eligible investments.
Subsection 4900(6)
Administrative Policy
18 April 1990 T.I. (September 1990 Access Letter, ¶1430)
Re eligibility of the shares of a Quebec business investment company.
2 November 89 T.I. (April 1990 Access Letter, ¶1191)
A person's dual status as both an employee and a shareholder of a corporation will not by itself cause the share to lose its status as a qualified investment. In order for s. 4900(8) to apply, it must be reasonable to consider that an amount received in respect of the share is on account of, and lieu of, or in satisfaction of payment for services provided by the employee-shareholder. This will be a question of fact.
Subsection 4900(12)
Administrative Policy
2001 Ruling 2001-007052 -
Shares of a corporation that was in the process of developing a parcel of land into a retirement community with a view to selling homes and apartments to individuals who would be interested in living in the retirement community, would qualify under Regulation 4900(12)(a).
Income Tax Technical News, No. 9, 10 February 1997
Where two unrelated shareholders each own 50% of the shares of a corporation, the fact that they used their own RRSPs to acquire shares of the corporation is not by itself an indication that they do not deal at arm's length with the corporation immediately after the acquisition, even though the corporation will be controlled by the group consisting of the two shareholders since they generally would act in concert.
2 September 1994 T.I. 5-942028
General discussion.
Subsection 4900(13)
Administrative Policy
1996 A.P.F.F. Round Table 7M12910 (Item 4.4.3)
One cannot conclude simply from the fact that a start-up corporation pays little salary to an individual who is a beneficiary of an RRSP holding dividend-paying shares of the corporation that Regulation 4900(13) applies. However, such an inference might be made where employees performing similar tasks but not holding shares through their RRSPs are better paid.