Section 207.61 — Income Tax Act: Tax payable on prohibited investment

A custodian of a retirement compensation arrangement shall pay a tax under this Part for a calendar year if, at any time in the year, the arrangement acquires property that is a prohibited investment for the arrangement; or subject property of the arrangement becomes a prohibited investment for the arrangement after March 29, 2012. The amount of tax payable in respect of each property described in subsection (1) is 50% of the fair market value of the property at the time referred to in that subsection. If in a calendar year an RCA trust disposes of a property in respect of which a tax is imposed under subsection (1) on the custodian of the retirement compensation arrangement, the custodian is entitled to a refund for the year of an amount equal to the amount of the tax so imposed, unless paragraph (b) applies; or nil, if it is reasonable to consider that the custodian, or a specified beneficiary of the arrangement, knew, or ought to have known, at the time the property was acquired by the arrangement, that it was, or would become, a property described in subsection (1), or if the property is not disposed of by the arrangement before the end of the calendar year following the calendar year in which the tax arose, or any later time that the Minister considers reasonable in the circumstances. If, at any time, a property held by an RCA trust ceases to be, or becomes, a prohibited investment for the RCA trust, the RCA trust is deemed to have disposed of the property immediately before that time for proceeds of disposition equal to the fair market value of the property at that time and to have reacquired the property at that time at a cost equal to that fair market value.