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What investments can be
held in an RRSP, RRIF, RESP or TFSA?
Income Tax Act S. 146(1), Reg. 4900
There are many investments which can be held in an RRSP, RESP or
RRIF, and Tax Free Savings Accounts (TFSA - see note at bottom) including:
money that is legal tender in Canada, and
deposits of such money.
Foreign currencies are
qualified investments, subject to certain
limitations. See Money
and deposits of money in the CRA document IT320R3 -
Qualified Investments. Prior to March 31, 2006,
foreign currency cash balances were not allowed under
the bylaws and regulations of the Investment Dealers
Association (IDA) of Canada. See the IDA
bulletin #3522 from March 2006 regarding the amendments which now allow
foreign currency cash balances in RRSPs.
Although foreign currencies are qualified
investments, brokerages are not rushing to provide the
option of holding foreign currencies in registered accounts.
This is apparently due to the restrictions of the software being
used. However, the brokerages make money every time foreign
currencies are converted to Canadian funds, so there is not much
incentive to provide this service. Perhaps the only
incentive is the fact that it would make their brokerage much more
attractive to RRSP holders. To reduce the cost of foreign
currency transactions in registered accounts, see our article on washing
trades.
Brokerages
which provide the option of holding foreign currencies in
registered accounts, as of March 6, 2011:
Scotia
iTrade offers a US friendly RRSP (not other registered
accounts) where they don't charge a "spread" on
currency conversions, but they have a quarterly fee for this
account. See Retirement
Accounts and click on the FAQ tab to find more
information.
Canadian federal, provincial and municipal government
bonds or similar obligations
bonds and similar obligations of
corporations, the shares of which are listed
on a prescribed stock exchange
certain annuities, if purchased from a licensed
annuities provider
securities listed on a designated (formerly prescribed) stock exchange
in Canada or other countries.
Exception - futures contracts or other
derivative instruments in respect of which the holder's risk of
loss may exceed the holder's cost.
Note that most Canadian
and US stock exchanges are included here, but Over-the-Counter
Facilities
such as NASDAQ OTC Bulletin Board facility, and the
Canadian OTC Automated Trading System are not included
in the list of designated stock exchanges. The
regular NASDAQ system is included in the designated stock exchanges.
See the Department of Finance document Designated Stock Exchanges.
guaranteed investment certificates (GICs)
exchange-traded funds,
i.e., funds which have the purpose of holding the
securities included in a stock exchange index, in the
same portions as the securities are reflected in the
index, or of replicating the investment performance of a
stock exchange index. Examples of exchange-traded
funds are SPDRs (Standard & Poor 500 Depository
Receipts), Diamonds (Dow Jones Industrial Average
units), and MSCI funds (Morgan Stanley Capital
Investment Index).
under certain conditions, shares of small business
corporations
under certain conditions, shares of venture capital
corporations
a mortgage in respect of real property
situated in Canada
an interest in a trust such as a mutual fund
trust, a unit trust resident in Canada, certain foreign
stock exchange trusts, and certain small business
investment trusts, as long as they are registered
investments
annuity contracts
warrants and rights that give the owner the
right to acquire property that is a qualified investment
call options - may be written (sold) as
long as the underlying shares are held in the RRSP (covered call option).
Call options also may be purchased inside an RRSP.
put options may
be purchased in an RRSP, RESP, RRIF or DPSP. This was a
change from the 2004 Federal Budget. For more information
see the Canada
Gazette 2005-09-21 and scroll down to (b) Part XLIX:
Qualified Investments.
put options may
be written (sold) in an RRSP. However, brokerages do not
seem to allow this.
royalty units listed on a prescribed Canadian
stock exchange, if its value is derived solely from
Canadian resource properties
limited partnership units listed on a
prescribed Canadian stock exchange
investment-grade gold and silver
bullion, coins, bars, and certificates on such investments. These must
be acquired either from the producer of the investment or
from a regulated financial institution. This change is
effective for investments made on or after February 23,
2005.
For a more detailed description of qualified investments, see the CRA
interpretation bulletin IT320R3
- Qualified Investments (which is out of date regarding the purchase of
put options).
Tax Free Savings Accounts: Qualified
investments include all of the above, as long as they are arm's
length investments.
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substitute for professional advice. Each person's situation differs, and
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site to your best advantage.
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