CRA indicates that a second mortgagee must exercise its legal (power of sale or foreclosure) remedies before writing off its mortgage

CRA concluded that a second mortgagee could not take a s. 50 write-down because, following failure to be paid in full, he had not pursued his legal remedies, i.e., selling the property under a power of sale, or foreclosing. There was no issue raised as to whether it would have been reasonable in the circumstances for the second mortgagee to have done this. (Since the first mortgagee must be paid off first, such collection action potentially could result in a further loss.)

Thus, no nod was given to the principles that deference should be given to taxpayer's judgment where its exercise was reasonable in the circumstances (Litowitz) and that there is no obligation to take collection steps if collection is not reasonably possible (Keating).

Neal Armstrong. Summary of 17 October 2014 Memo 2014-0535121I7 F under s. 50(1).