Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CCRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.
Principal Issues: Is a time-share purchase a qualified investment for RRSP purposes?
Position: No. Shares of a corporation that is in the business of selling time-shares may be a qualified investment but, if so, there may be other issues.
Reasons: A time-share is not listed as a qualified investment in subsection 146(1) or prescribed to be a qualified investment in regulation 4900 of the Act.
XXXXXXXXXX 2001-008878
G. Allen
October 4, 2001
Dear XXXXXXXXXX:
Re: Self-Directed Registered Retirement Savings Plan ("RRSP") - Time-Share Purchase
This letter is in reply to your letter dated June 14, 2001 concerning whether a time-share purchase is a qualified investment for an RRSP.
Written confirmation of the tax implications inherent in particular transactions are given by this Directorate only where the transactions are proposed and are the subject matter of an advanced income tax ruling request. For more information concerning advance tax rulings, please refer to Information Circular 70-6R4 dated January 29, 2001. Copies of information circulars are available at your local Tax Services Office or on the Internet at http://www.ccra-adrc.gc.ca/formspubs/menu-e.html. Where the particular transactions are completed, the enquiry should be addressed to the relevant Tax Services Office. However, we are prepared to provide the following general comments, which may be of assistance.
The types of investments that are considered qualified investments for an RRSP are described in the definition of "qualified investment" in subsection 146(1) of the Income Tax Act (the "Act"). Additionally, other investments prescribed by section 4900 of the Income Tax Regulations (the "Regulations") are also qualified investments. Information concerning qualified investments for an RRSP may be found in Interpretation Bulletin IT-320R2, entitled "Registered retirement savings plans - Qualified investments", (available at your local tax services office or on the internet at www.ccra.gc.ca/formspubs/menu-e.html).
A time-share purchase is not listed as a qualified investment for an RRSP under either subsection 146(1) of the Act or section 4900 of the Regulations.
However, where an RRSP trust purchases shares of a corporation whose business is that of selling time-shares, the shares of the corporation may be a qualified investment for an RRSP. Generally, the shares of a corporation whose shares are listed on a prescribed stock exchange in Canada or in a country other than Canada will be a qualified investment for RRSP purposes. When the shares of a corporation are not publicly traded, the shares may qualify as an investment for an RRSP under paragraph 4900(6)(a) of the Regulations if the corporation is an "eligible corporation" or under paragraph 4900(12)(a) of the Regulations if the corporation is a "small business corporation". If a benefit is conferred on the annuitant of an RRSP by virtue of an RRSP trust holding shares of a corporation that are a qualified investment, the benefit conferred on the annuitant may be taxable in accordance with subsection 146(8) of the Act.
Where a trust governed by an RRSP acquires a non-qualified investment in a taxation year, the fair market value of the non-qualified investment at the time of its acquisition is brought into the income of the RRSP annuitant in accordance with subsection 146(10) of the Act. When the RRSP trust disposes of the non-qualified investment, subsection 146(6) applies to permit a deduction to the annuitant in the year of disposition equal to the lesser of the amount that was included in income under subsection 146(10) and the proceeds of disposition of the property.
We trust the above comments may be of assistance.
Yours truly,
Roberta Albert, CA
for Director
Financial Industries Division
Income Tax Rulings Directorate
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