CRA ruling confirms that a s. 149(1)(o.2)(ii)(A) permitted activity can include an implied activity

A corporation which was otherwise exempted under ss. 149(1)(o.2)(ii) and (iv) will borrow money from an arm’s length lender on the security of a mortgage on some of its existing real estate, and use the loan proceeds to acquire, on an unencumbered basis, Canadian income-producing real property, or invest in real estate partnerships described in s. 149(1)(o.2)(ii)(A)(II).

CRA ruled that such borrowing and acquisition will not, by themselves, cause the corporation to fail to comply with s. 149(1)(o.2)(ii). The CRA summary stated:

The use of existing real property to secure additional borrowing, where such borrowed money is used for activities described in subclause 149(1)(o.2)(ii)(A)(I) or (II), is part of acquiring and investing in real property for the purposes of subparagraph 149(1)(o.2)(ii).

Apparently, someone was concerned that the list of permitted activities in s. 149(1)(o.2)(ii)(A) did not include the granting of a security interest on real property that was not itself being acquired, and the answer was that this was part and parcel of the acquisition of the further real estate.

Neal Armstrong. Summary of 2021 Ruling 2020-0872241R3 under s. 149(1)(o.2)(ii)(A).