6 July 1992 Administrative Letter 9219336 F - RRSP Mortgages And Advantages To Annuitant

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.

July 6, 1992

Registered Plans DivisionFinancial Industries DivisionS.M. KotlarDirector

Attention: Lyne Aubin-Morrisset

RRSPs issuing non arm's length mortgages at non-market rates

24(1)

To meet the conditions for a qualified investment for an RRSP in regulation 4900(1)(j) such mortgages need only be insured and administered as indicated therein.  However, where the administrator, who is also the trustee, agrees to a mortgage at a rate less than market, or agrees to other terms more favourable than market conditions, it is our position that an advantage is being extended to the annuitant as envisaged by paragraph 146(2)(c.4).  Accordingly, the issuer is liable to a penalty pursuant to subsection 146(13.1)

Furthermore, where the issuer agrees to a mortgage with the annuitant as the mortgagor, at an interest rate in excess of market, it is our position that such payments in respect of the interest in excess of the market rate would be a contribution to an RRSP and Part X.1 tax could be applicable to these contributions.

for DirectorFinancial Industries DivisionRulings Directorate