Stock exchange – Designated
August 15, 2011
This guidance product replaces Summary policy CSP-P17, Prescribed stock exchange and Summary policy CSP-S15, Stock exchange.
Generally, registered charities may accept gifts of securities that are traded on a stock exchange (shares, rights to acquire shares, and debt obligations). However, the Income Tax Act may not allow tax relief when such gifts are made to private foundations by persons who do not deal at arm's length with the charity (see Non-qualified investment and Non-qualifying security) unless the gifted shares, rights to acquire shares, and/or debts are publicly traded on a designated stock exchange. The “designated stock exchange” category replaces provisions in the Income Tax Act that had previously referred to a “prescribed stock exchange.”
Typically, a stock exchange is a place where security trading (for example, a share, a right, or a debt obligation) is conducted on an organized system. There is no process by which an entity is formally identified as a stock exchange. It has not been defined in the Income Tax Act, but the generally accepted legal and commercial meaning is intended to apply.
The Income Tax Act defines two specific types of stock exchanges for income tax purposes: a recognized stock exchange and a designated stock exchange.
Recognized stock exchange
A recognized stock exchange is a designated stock exchange, and any other stock exchange either located in Canada or in a country that is a member of the Organization for Economic Co-operation and Development and that has a tax treaty with Canada.
Designated stock exchange
A designated stock exchange is a stock exchange, or a part of a stock exchange, that has been designated as such by the Minister of Finance. All designated stock exchanges are recognized stock exchanges.
A designated stock exchange is listed on the Department of Finance Canada website, or by any other means that the Minister of Finance considers appropriate. There are five designated stock exchanges in Canada:
- the Canadian National Stock Exchange (CNSX)
- the Montreal Exchange
- the TSX Venture Exchange (Tiers 1 and 2)
- the Toronto Stock Exchange
- the Aequitas NEO Exchange
The list also includes many stock exchanges outside Canada, which have also been designated.
Income Tax Act, R.S.C. 1985 (5th supp.) c. 1, ss. 248(1) and ss. 262(4)
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