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:
Will debt issued by a condominium corporation be a qualified investment for an RRSP?
Position: Yes, if certain conditions are satisfied.
Reasons:
Pursuant to paragraph 4900(1)(r) of the Regulations, debt of a condominium corporation will be a qualified investment for an RRSP if the corporation is without share capital, the corporation deals at arm's length with the annuitant and the beneficiaries of the RRSP, the taxable income of the corporation is exempt from tax pursuant to paragraph 149(1)(l) of the Act, and either (i) the debt is issued by the corporation as part of an issue of debt by the corporation for an amount of at least $25 million, or (ii) at the time of the acquisition of the debt by the plan trust, the corporation had issued debt as part of a single issue for an amount of at least $25 million.
2001-006891
XXXXXXXXXX G. Kauppinen
(613) 957-8971
March 6, 2001
Dear XXXXXXXXXX:
Re: Registered Retirement Savings Plan ("RRSP")
This is in reply to your facsimile transmission dated January 31, 2001 wherein you inquired whether an RRSP could loan funds to a condominium corporation.
You have asked us to assume that neither the annuitant nor any beneficiary of the RRSP owned any units in the condominium corporation at the time that the loan would be made.
Pursuant to paragraph 4900(1)(r) of the Income Tax Regulations debt of a condominium corporation will be a qualified investment for an RRSP if the corporation is without share capital, the corporation deals at arm's length with the annuitant and the beneficiaries of the RRSP, the taxable income of the corporation is exempt from tax pursuant to paragraph 149(1)(l) of the Income Tax Act ("Act"), and either (i) the debt is issued by the corporation as part of an issue of debt by the corporation for an amount of at least $25 million, or (ii) at the time of the acquisition of the debt by the plan trust, the corporation had issued debt as part of a single issue for an amount of at least $25 million.
Under the assumption above, the condominium corporation would be considered to be dealing at arm's length with the annuitant and the beneficiaries of the RRSP.
As stated in paragraph 4 of Interpretation Bulletin IT-304R2, Condominiums, most residential condominium corporations will qualify as a non-profit organization within the meaning of paragraph 149(1)(l) of the Act (however, this will be a question of fact). We refer you to the current version of IT-496, Non-profit Organizations, for information of the conditions necessary to qualify as a tax-exempt non-profit organization.
We trust our comments will be of assistance to you.
Roberta Albert, CA
for Director
Financial Industries Division
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