(October 5 – 08:55 ET) – The migration of stocks listed on the Canadian Dealer Network stock to the Canadian Venture Exchange is causing some headaches over their uncertain tax status.
The Investment Delears Association has requested that brokerage firms place an RRSP ineligibility “block” on all CDNX Tier 3 stocks where the corporation and the particular shareholder have not met certain requirements under the Income Tax Act. All former CDN stocks listed on the CDNX are Tier 3 stocks. These stocks trade under the prefix “Y”.
The problem is rooted in the fact that some CDN corporations enjoy private corporation tax status benefits because they are not listed on a prescribed exchange under the Income Tax Act. This means they may be eligible to claim for such benefits as the small business deduction and enhanced investment tax credits. Moving to the CDNX should kill these benefits.
However, in an effort to retain these tax benefits for these firms, the CDNX has applied to the federal Department of Finance to grant new Tier 3 corporations exemption from being a “prescribed exchange” listing. However, this exemption will stop Tier 3 corporations from being RRSP eligible unless the corporation and the particular shareholder meet a number of requirements imposed by the Act.
The IDA says, “The Department of Finance requires concrete assurances that investors will be made aware of the restricted RRSP eligibility issue prior to trading in Tier 3 stocks.”
-IE Staff