17 October 2003 External T.I. 2003-0042825 - MORTGAGES WRITE-OFF RRSP

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: Clarification of issues in a letter sent previously to the taxpayer

Position: Explained different options available to the taxpayer

Reasons:

XXXXXXXXXX 								2003-004282
M. P. Baldwin, CA
October 17, 2003 

Dear XXXXXXXXXX:

Re: Write-off of Mortgages held in an RRSP

This is reply your letter of September 30, 2003, requesting an advance income tax ruling concerning mortgages held in your self-directed registered retirement savings plan ("RRSP"), in which you refer to our letter to you of September 18, 2003 (file number 2003-001729).

An advance income tax ruling is a written statement given by the Income Tax Rulings Directorate to a taxpayer stating how the Canada Customs and Revenue Agency ("CCRA") will interpret and apply specific provisions of existing Canadian income tax law to a definite transaction. As noted in paragraph 5 of Information Circular 70-6R5 dated May 17, 2002 (enclosed), the cost of providing the advance income tax ruling is borne by those taxpayers who benefit from it. Accordingly, the CCRA charges a fee for time spent in connection with advance income tax ruling requests. Currently, the fee is $100 (plus GST) for each of the first 10 hours or part of an hour and $155 (plus GST) for each subsequent hour or part of an hour spent on the ruling request. An advance payment equal to five hours of work plus GST ($535) is required. As noted in paragraph 16 of Information Circular 70-6R5, a request for an advance income tax ruling must be set out in prescribed form with all the required information and a prepayment of the advance fee.

It should be noted that the CCRA does not provide advance income tax rulings when the matter involves the determination of the fair market value of property. However, either you or the trustee of your RRSP can contact the Valuations section at you local tax services office to discuss the valuation procedures for property.

The Income Tax Rulings Directorate also provides, in writing, technical interpretations of specific provisions of income tax law, which is the nature of our letter to you on September 18, 2003. Technical interpretations provided to the public are not income tax rulings and are not binding on the CCRA nor is a fee charged for this service.

As noted in our letter of September 18, 2003, there are various alternatives available to you to remove the mortgages from your RRSP. The method chosen to remove the mortgages from your RRSP can only be determined by you as the annuitant of the RRSP and the CCRA cannot provide advice as to which alternative should be chosen.

With respect to your question on whether any money recovered from the lawsuit can be put back into your RRSP, we refer you to our letter of September 18, 2003 where we commented that in cases where restitution of funds can be obtained as the result of any actions taken by the annuitant of the RRSP or the RRSP trustee involving a proposal to settle a dispute regarding damages claimed by the RRSP, the CCRA has previously taken the position in Advance Tax Ruling ATR-24 that the RRSP trust may be replenished with funds received as a result of the action. A determination would have to be made whether the particular facts in your case are the same as in ATR-24. The position in ATR-24 would not allow an annuitant to contribute additional funds to an RRSP to replace any lost funds, without any tax implications.

We trust that the above comments will be of assistance to you.

Yours sincerely,

Roberta Albert, CA
for Director
Financial Industries Division
Income Tax Rulings Directorate