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:
Whether or not shares qualify as debts owing to a corporation as described in subparagraph 130.1(6)(f)(i)
Position: No
Reasons: A share is not a debt
XXXXXXXXXX 2002-013811
May 21, 2002
Dear XXXXXXXXXX:
Re: Mortgage Investment Corporation ("MIC")
This is in reply to your facsimile of May 2, 2002 requesting our views as to whether an investment in shares of a MIC by another MIC would qualify as debts secured by residential property for purposes of subparagraph 130.1(6)(f)(i) of the Income Tax Act (the "Act").
Paragraph 130.1(6)(f) of the Act requires that at least 50% of the cost amount of all of the property of a MIC must generally consist of debts owing to the corporation that were secured inter alia by mortgages on houses as defined in section 2 of the National Housing Act, deposits standing to the credit of the MIC in the records of a bank or credit union and money. In the situation where a MIC invests in shares, it is our view that such an investment would not be a debt owing to the MIC for the purposes of subparagraph 130.1(6)(f)(i) of the Act.
We trust that the above will be of assistance.
Yours truly,
F. Lee Workman
Manager
Financial Institutions Section
Financial Industries Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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