Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Principal Issues: Would a mortgage investment corporation lose its status if it invests in shares of a Canadian corporation that owns and manages real property?
Position: The investment in shares of the capital stock of a corporation resident in Canada would not, in and of itself, cause a mortgage investment corporation to lose its status as such.
XXXXXXXXXX
2012-045029
Long Ip
(613) 948-5273
October 12, 2012
Dear XXXXXXXXXX:
Re: Mortgage Investment Corporation
We are writing in response to your email dated May 31, 2012, wherein you asked whether a mortgage investment corporation ("MIC") would continue to qualify as such if the corporation invests in shares of a subsidiary corporation resident in Canada that owns and manages real property.
Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings, dated May 17, 2002. However, we can provide the following general comments which may be of assistance.
Our Comments
Subsection 130.1(6) of the Income Tax Act (the "Act") defines a MIC for purposes of the Act. In this regard, to qualify as a MIC, a corporation must meet all of the criteria stated in subsection 130.1(6) of the Act throughout a taxation year. The criteria include specific requirements regarding the share ownership structure of the corporation, restrictions as to the nature of investment activities in which the corporation may engage, and the types of property and proportion of such property that must be, and that can be, held by the corporation.
Paragraph 130.1(6)(b) of the Act requires that a MIC’s “only undertaking was the investing of funds” and that “it did not manage or develop any real property”. The MIC definition does not preclude the investing of funds in shares of a corporation resident in Canada. Provided that all other criteria for being a MIC are satisfied and that there are no
facts which would suggest that the MIC is involved in the management or development of any real property held by the corporation, the mere holding of shares in a corporation resident in Canada would not, in and of itself, cause the MIC to no longer qualify as a MIC. Whether a particular corporation meets all the requirements of the MIC definition in subsection 130.1(6) of the Act is a question of fact that can only be determined after reviewing all the relevant information.
We trust these comments are of assistance.
Yours truly,
Jenie Leigh
Section Manager
for Division Director
Financial Industries and Trusts Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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