# Tax Expert Question, OTC Stock in RRSP/TFSA with a Twist



## e86s54 (Mar 27, 2014)

My spouse and I, along with friends of mine own a stock from a company we use to work for. I hold some in various TFSAs and RRSPs accounts with a couple of different banks. Last year they were delisted for non-compliance and are now trading on the OTC. A little while after delisting, I got a letter from only RBC saying that OTC stocks are not permitted within a RRSP or TFSA and if not liquidated could be subject to penalties. No other Canadian Bank notified us or any of my friends (Scotia, TD & BMO) . OK, nothing new here.

Here's the interesting part. I did not sell the stocks and continue to hold them in RRSPs & TFSAs. after a 14 or so months, I have not received any correspondence from RBC , other banks or the CRA. I didn't sell because it would have meant an almost complete loss and I knew the company was way undervalued and had potential for big gains. During the delisting they carried on as any listed company and said they would relist when their fortunes turned around. Well, sure enough the company is now trading at 6x the delisting and have announced they will relist in the coming weeks after a 15 month hiatus. So my question is this...if I purchased them when they were listed on an approved exchange, they delists, did not touch or trade any of it and about 15 months later they relist, what will happen!? Will the relisting of the stock trigger anything with regards to the CRA? Would it even be noticed or my accounts now just show the 'new' stock' (likely same ticker without the OTC)? 
I'm mostly interested in anyone who has been in this situation and what occurred.
Thanks in advance for all responses!


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## eljay (Mar 10, 2014)

e86s54 said:


> My spouse and I, along with friends of mine own a stock from a company we use to work for. I hold some in various TFSAs and RRSPs accounts with a couple of different banks. Last year they were delisted for non-compliance and are now trading on the OTC. A little while after delisting, I got a letter from only RBC saying that OTC stocks are not permitted within a RRSP or TFSA and if not liquidated could be subject to penalties. No other Canadian Bank notified us or any of my friends (Scotia, TD & BMO) . OK, nothing new here.
> 
> Here's the interesting part. I did not sell the stocks and continue to hold them in RRSPs & TFSAs. after a 14 or so months, I have not received any correspondence from RBC , other banks or the CRA. I didn't sell because it would have meant an almost complete loss and I knew the company was way undervalued and had potential for big gains. During the delisting they carried on as any listed company and said they would relist when their fortunes turned around. Well, sure enough the company is now trading at 6x the delisting and have announced they will relist in the coming weeks after a 15 month hiatus. So my question is this...if I purchased them when they were listed on an approved exchange, they delists, did not touch or trade any of it and about 15 months later they relist, what will happen!? Will the relisting of the stock trigger anything with regards to the CRA? Would it even be noticed or my accounts now just show the 'new' stock' (likely same ticker without the OTC)?
> I'm mostly interested in anyone who has been in this situation and what occurred.
> Thanks in advance for all responses!


I'm in same situation. What happened to you?
Company failed to file, got delisted, got new board, is now relisting. I have shares in TFSA.


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## Nerd Investor (Nov 3, 2015)

Was it a Canadian company traded on the TSX before being delisted? If so my understanding is it will not lose its status as a qualifying investment. Here's an excerpt from the relevant income tax folio:

*Suspended from trading or de-listed

1.21 Shares of a corporation resident in Canada that were listed on a designated stock exchange in Canada but that have been suspended from trading or delisted will generally retain their qualified investment status on the basis that such a corporation continues to be a public corporation. As discussed in ¶1.23, shares of a public corporation are qualified investments. Qualified investment status could be lost, however, if the corporation elected (or was designated) not to be a public corporation. In most other situations, the suspension or delisting of a security will result in loss of qualified investment status, unless the security also qualifies under another provision*

Here's the link to the entire document: http://www.cra-arc.gc.ca/tx/tchncl/ncmtx/fls/s3/f10/s3-f10-c1-eng.html


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## eljay (Mar 10, 2014)

Nerd Investor said:


> Was it a Canadian company traded on the TSX before being delisted? If so my understanding is it will not lose its status as a qualifying investment. Here's an excerpt from the relevant income tax folio:
> 
> *Suspended from trading or de-listed
> 
> ...


thanks for replay. I "think" they were Canadian at the time, albeit with just an address in Toronto or Vancouver. The last board was under a lot of scrutiny from the OSC but I don't know if that's just because they were TSX listed or were actually considered Canadian. we shareholders have managed to flush all the Canadians out lol. They were a mess.
they are currently registered in Jersey now with mailing address in Peru, where the mines are.
they've said they are going to be TSX-V listed before end of 2016, possibly in the next few weeks.

In the same link I see this, which gives me a bit of courage (though I haven't paid anything yet, I've been sandbagging as long as possible). My broker and the CRA seem to work on the assumption that delisted = dead. But the OP obviously encountered something similar to me, where delisted != dead.

1.74 If a non-qualified investment becomes qualified while being held by an RRSP, RRIF or TFSA, subsection 207.01(6) deems the investment to have been disposed of and reacquired by the plan. This might happen when a delisted security is relisted. Subsection 206.1(6) provides a similar rule for RDSPs. This ensures that a refund is available in this situation, provided the conditions described in ¶1.73 are met.


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