Chapter History S3-F10-C2, Prohibited Investments – RRSPs, RESPs, RRIFs, RDSPs, FHSAs and TFSAs

Introduction

The purpose of a Chapter History page is to highlight any amendments to the information contained in a chapter of an income tax folio, including amendments to the information originally contained in an interpretation bulletin that has been cancelled and replaced with a folio chapter. It outlines amendments that have been made as a result of legislative changes and proposed legislative changes, precedential court decisions, as well as new or revised interpretations of the Canada Revenue Agency (CRA).

Except as otherwise noted, all statutory references herein are references to provisions of the Income Tax Act, R.S.C., 1985, c.1 (5th Supp.), as amended and all references to a Regulation are to the Income Tax Regulations, C.R.C., c. 945, as amended.

Update May 28, 2024

In the February 22, 2024 update, ¶2.3 was amended to add a legislative reference to subsection 146.6(3). This suggested that if a First Home Savings Account (FHSA) held an investment that was both a non-qualified investment and a prohibited investment, then for purposes of the taxing provision in Part XI.01, the investment would be deemed by subsection 207.04(3) to be a prohibited investment only.

¶2.3 has been updated to remove the reference to subsection 146.6(3) because it was not added to subsection 207.04(3) with the introduction of the FHSA regime. Although the policy intent may clearly include an FHSA in this context, ¶2.3 has been updated to accurately reflect the legislation as it currently reads.

¶2.25 has been updated to remove the general statement regarding the form related to the FHSA and to add the appropriate reference and link to the RC728, First Home Savings Account (FHSA) Return.

Update February 22, 2024

With the introduction of the First Home Savings Account (FHSA) made by S.C. 2022, c.19, s.31 (formerly Bill C‑32) and in force April 1, 2023, the title and a number of paragraphs in the Chapter have been revised to reflect the extension of the prohibited investment rules to this new plan, where applicable.

Update October 1, 2018

General revisions have been made to the Chapter to improve readability. The following changes have also been made to the Chapter.

The Summary has been updated to include a cross-reference to new Income Tax Folio S3-F10-C3, Advantages – RRSPs, RESPs, RRIFs, RDSPs and TFSAs.

The English version of ¶2.5 has been updated to include a reference to the civil law concept of a right in the last item in the list.

¶2.35.1 and ¶2.35.2 have been added, and a number of paragraphs have been revised because of the extension of the prohibited investment rules to RESPs and RDSPs (added by S.C. 2017, c. 33, generally applicable after March 22, 2017).