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 CCRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.
Principal Issues: In circumstances where a limited partnership takes out a mortgage on its real property, would a limited partner who is the annuitant of the RRSP be considered to be the mortgagor for purposes of paragraph 4900(1)(j) of the Regulations
Position: The determination of the issue is a factual one and can only be determined in the context of an advance income tax ruling.
Reasons: In an ordinary partnership the partner would be considered the mortgagor for purposes of paragraph 4900(1)(j) and the taxpayer would have to demonstrate to us that the limited partner should be treated differently.
XXXXXXXXXX 2001-010291
M. P. Baldwin, CA
June 10, 2002
Dear XXXXXXXXXX:
Re: Paragraph 4900(1)(j) of the Income Tax Regulations
This is reply to your letters of September 25, September 26, November 27, 2001 and February 11, 2002 and numerous phone calls (XXXXXXXXXX /Baldwin) requesting an interpretation of paragraph 4900(1)(j) of the Income Tax Regulations (the "Regulations"). We apologize for the delay in responding to you, however, based on the information discussed in our phone calls, it was our understanding that you would be requesting an advance income tax ruling on this issue.
The particular situation outlined in your letter appears to relate to a factual one, involving a specific taxpayer. As explained in Information Circular 70-6R4, it is not this Directorate's practice to comment on proposed transactions involving specific taxpayers other than in the form of an advance income tax ruling. Should your situation involve a specific taxpayer and a completed transaction, you should submit all relevant facts and documentation to the appropriate Tax Services Office for their views. However, we are prepared to offer the following general comments, which may be of assistance.
As noted in paragraph 9 of Interpretation Bulletin IT-320R2, a mortgage secured by real property situated in Canada, or an interest therein, is a qualified investment for an RRSP provided it meets the requirements of paragraph 4900(1)(j) of the Regulations. There is no requirement that the mortgage be a first mortgage.
The Income Tax Act (the "Act") does not define a "partnership", but it is generally considered to be the relationship that exists between persons who carry on business together with a profit motive. As noted in paragraph 1 of Interpretation Bulletin IT-138R, for purposes of the Act, a partnership is not a person and is not deemed to be a person.
However, in determining a member's share of the income or loss of the partnership from a source or from sources in a particular place, the partnership first computes its income as if it were a person.
Where a partnership is a mortgagor under a mortgage, the Canada Customs and Revenue Agency (the "Agency") has taken the general view that each partner of the partnership is a mortgagor for purposes of the Act.
With respect to paragraph 4900(1)(j) of the Regulations, the determination of whether a limited partner would be considered a mortgagor with respect to a mortgage granted by a limited partnership would be a question of fact. This factual determination could only be determined after a thorough review of all the facts, including the partnership agreement, the mortgage granted and the applicable partnership and tax legislation, in the context of an advance income tax ruling.
In addition, the determination of the relationship between a beneficiary of a trust and the annuitant of co-mortgagee RRSPs is a question of fact which again can only be determined after a thorough review of all the facts in the context of an advance income tax ruling.
We trust that the above comments will be of assistance to you.
Yours truly,
Roberta Albert, CA
for Director
Financial Industries Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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