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 Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues:
Can a person pool investments on behalf of 6 RRSPs and 2 investment accounts for relatives?
Position:
No
Reasons:
Does not qualify as a mutual fund trust, small business investment trust or a registered investment.
960943
XXXXXXXXXX M.P. Sarazin
April 12, 1996
Dear Sir:
Re: Investment Trusts
This is in reply to your letter dated February 25, 1996, wherein you requested our comments with regards to setting up an investment trust in order to minimize the costs associated with the investments that you control in six registered retirement savings plans ("RRSP") and two investment accounts for your relatives.
The enclosed Interpretation Bulletin IT-320R2 provides general information on the kinds of property that constitute qualified and non-qualified investments for a trust governed by an RRSP and also discusses the income tax consequences of an RRSP acquiring and holding non-qualified investments. Such investments for an RRSP must be held in an RRSP trust, and there must be at least one RRSP trust for each annuitant. The RRSP trust can invest in another trust which holds the investments, however there are only a few such trusts in which the RRSP can invest. In particular, paragraph 11 of IT-320R2 states:
"An interest in a trust is a qualified investment at a particular time only if the trust is
(a)at that time, a mutual fund trust or, after October 31, 1985, a small business investment trust; or
(b)a registered investment during the calendar year in which the particular time occurs, or the immediately preceding year."
A "mutual fund trust" is defined in subsection 132(6) of the Act. However, certain prescribed conditions relating to the number of its unit holders, dispersal of ownership of its units and public trading of its units have to be satisfied. One of the conditions is that there are no fewer than 150 beneficiaries of the trust. These prescribed conditions are found in sections 4801 and 4803 of the Income Tax Regulations (the "Regulations").
A "small business investment trust" is defined in subsection 5103(1) of the Regulations. In order to qualify as a small business investment trust certain conditions would have to be met including the condition that no related group of persons own more than 30% of the units of the trust.
A "registered investment" is defined in subsection 204.4(1) of the Act. In order to be accepted for registration, the conditions include, inter alia, that a trust has to have as its sole trustee a corporation licensed to carry on in Canada the business of offering to the public its services as trustee and if only RRSP trusts are investing in it, there must be at least 100 of them.
Since your investment trust will not qualify as a mutual fund trust, a small business investment trust or a registered investment, a unit of the investment trust will not be a qualified investment for purposes of the RRSPs. Consequently, it is not possible to pool the investments held by each of the six RRSPs and the investments held in the two investment accounts.
We trust the above comments will be of assistance to you.
Yours truly,
for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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