11 January 1991 External T.I. 9032355 F - Consequences of an RRSP Trust Becoming a Mortgagee in Possession

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.

5-903235

Dear Sir:

This is in reply to your letter of November 2, 1990 concerning the income tax consequences of a trust governed by an RRSP becoming a mortgagee in possession.

Since the subject matter of your request concerns a completed transaction we are unable to offer any opinion on it.  Instead, we would ask that you address your concerns to your local District Taxation Office for their consideration.  Should they then require it, we would be pleased to offer our assistance in resolving your situation.

While we can not offer any direct assistance to you, we can note that, in general, a mortgagee in possession would, subject to the terms of a mortgage, add such monetary expenditures as are necessary to maintain a property, to the mortgage principal, with interest.  As part of the mortgage loan the expenditures would, therefore, not be ineligible investments.  We must caution however, that this is a general opinion and it may not be appropriate in all circumstances, and in particular when the mortgagor is not at arms length with the RRSP trust.  We would also note that there could be serious tax implications if the trust did not have sufficient funds to meet its obligations as the mortgagee in possession or if the RRSP beneficiary paid the expenses instead of the trust.

We regret that our reply could not specifically address your situation but trust that our comments will be of assistance to you.

Yours truly,

for DirectorFinancial Industries DivisionRulings Directorate