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 annuitant can be in charge of collecting mortgage payments for the RRSP where annuitant does not deal at arm's length with mortgagor.
Position:
No.
Reasons:
Contravenes 146(2)(c.4) inasmuch as it is an advantage to the non-arm's length mortgagor; may contravene 4900(1)(j) if collection by annuitant results in mortgage not being "administered" by an approved lender.
961167
XXXXXXXXXX P. Spice
Attention: XXXXXXXXXX
May 2, 1996
Re: Non-Arm's Length Mortgage Investment by Registered Retirement Savings Plan ("RRSP")
This is in reply to your letter of March 11, 1996, in which you ask whether it would be acceptable to allow the annuitant of an RRSP mortgagee to collect mortgage payments directly from the mortgagor who does not deal at arm's length with the annuitant. This would be an alternative to the mortgagor making payments directly to the trust company administering the RRSP.
As stated in Interpretation Bulletin IT-320R2 ("Registered Retirement Savings Plans - Qualified Investments") in paragraph 9, the mortgage must be administered by an approved lender and, furthermore, it must be administered as if it were a mortgage on property owned by a stranger. Acceptable procedures for the collection of the mortgage payments must meet these requirements. In our view, it is unlikely that your proposal would satisfy either of these conditions.
We trust our comments will be of assistance to you.
Yours truly,
for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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