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.
Revenue Canada Taxation Head Office
R. Nanner (613)957-3494
December 15, 1987
Dear Sirs:
Paragraph 4900(1)(j) and subsection 4900(4) of the Income Tax Regulations (the "Regulations")
This is in response to your letter of November 4, 1987 wherein you asked us to confirm the following:
I Subsection 4900(4) of the Regulations does not override paragraph 4900(l)(j) thereof.
II An investment in a mortgage includes an investment in a portion thereof.
III An agreement by the trustee of a registered retirement savings plan ("RRSP") to not enforce a personal covenant in the mortgage will not violate the requirement that the mortgage terms reflect normal commercial practice.
We confirm that paragraph 4900(1)(j) and subsection 4900(4) of the Regulations operate independently of each other. Consequently a mortgage that does not qualify under subsection 4900(4) can be a qualified investment provided it meets the requirements of paragraph 4900(1)(j) of the Regulations. For greater details please refer to IT-32 OR as amended by our "Special Release" dated May 25, 1984.
We also agree with your view that an investment in a mortgage includes an investment in a portion thereof.
With regard to III above, it is our opinion that such an agreement would not be considered normal commercial practice unless the agreement does not cover a period exceeding a period after which a commercial lender would initiate collection/legal action.
We hope these comments are of assistance to you.
Yours truly,
for Director Financial Industries Division Rulings Directorate Legislative and Intergovernmental Affairs Branch
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