27 November 1995 External T.I. 9528505 - MIC

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.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues:

Whether a corporation can qualify as a MIC where it will not hold any residential mortgages at all (ie. property described in subparagraph 130.1(6)(f)(i)) but will hold at least 50% of the cost amount of its property in investments described in subparagraph 130.1(6)(f)(ii) or in cash. The other 50% raised will be invested in a commercial third mortgage on a potato farming operation.

Position:

Transaction relies on interpretation of specific provision of Act but could be subject to GAAR.

Reasons:

May be contrary to purpose of legislation.

		952850
XXXXXXXXXX	Michael Cooke

Attention: XXXXXXXXXX

November 27, 1995

Dear Sirs:

Re: Subsection 130.1(6) of the Income Tax Act ("Act")

This is in reply to your letter dated October 25, 1995, and your facsimile dated November 1, 1995, wherein you requested our views on whether a corporation would qualify as a Mortgage Investment Corporation ("MIC"), as defined in subsection 130.1(6) of the Act, in the proposed fact situation as outlined in your letter.

We are unable to confirm your views. Confirmation as to the income tax consequences of a proposed transaction can only be obtained in an advance income tax ruling obtained under the guidelines set out in Information Circular 70-6R2 dated September 28, 1990, and the Special Release thereto dated September 30, 1992, issued by Revenue Canada. We can, however, provide you with the following general comments.

The purpose of the MIC legislation was to increase the flow of private sector financing into residential housing in Canada. However, where a corporation does not ever intend to hold debts described in subparagraph 130.1(6)(f)(i) of the Act the department would have to consider whether the general anti avoidance rule ("GAAR") applied.

To this end should you wish to proceed with an advance income tax ruling on your proposed transactions or on revised proposed transactions request please include in any submission you make an analysis as to why GAAR should not apply. We are unable to provide you with an estimate of the expected costs of advance income tax rulings in advance. The total of such costs will depend on several factors, including the completeness of the required information provided by the taxpayer (see paragraph 15 of IC 70-6R2), the complexity of the issues involved and the number of rulings requested.

Yours truly,

F. Lee Workman
Section Chief
Financial Institutions Section
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch