22 April 1993 External T.I. 9309525 F - RRSP Investments Mortgages

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.

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Attention:  XXXXXXXXXX

Dear Sirs:

RE:  Mortgages as Qualified Investments for an RRSP

This is in reply to your letter of March 24, 1993, regarding the above noted subject and in particular with respect to four specific fact situations.

Confirmations of the tax implications in particular situations may only be provided by this Directorate where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in the Department's Information Circular 70-6R2. If the transactions are already completed, any enquiries with respect to them must be submitted to the relevant District Taxation Office for the Department's comments but only when they are submitted with all particulars including the identifications of the parties involved.

While we are unable to address your specific situation, we can offer you the following general comments.

Depending upon the relationship between the mortgagor and the mortgage, a mortgage may qualify as a qualified investment under paragraph 4900(1)(j) or subsection 4900(4) of the Income Tax Regulations (the "Regulations").

If the mortgagor is the annuitant under the RRSP or is a person with whom the annuitant does not deal at arm's length, then the mortgage does not qualify as a qualified investment under subsection 4900(4) of the Regulations. Nevertheless, the mortgage may qualify under paragraph 4900(1)(j) of the Regulations provided it satisfies the following conditions:

(a)     the mortgage is in respect of real property situated in Canada;

(b)     the mortgage is administered by an approved lender under the National Housing Act;

(c)     the mortgage is insured under the National Housing Act or by a corporation offering its services to the public in Canada as an insurer of mortgages;

(d)     the rate of interest on the mortgage and other terms reflect normal commercial practice; and

(e)     the mortgage is administered as if it were a mortgage on a property owned by a stranger.

If the mortgagor is not the annuitant under the RRSP, nor is he a person with whom the annuitant does not deal at arm's length, then the mortgage, provided it is secured by real property situated in Canada, will qualify under subsection 4900(4) of the Regulations.

It is our opinion that it is a question of fact whether or not a corporation and its shareholders are at arms length and as stated in the Department's Interpretation Bulletin IT-419 at paragraph 17, it is assumed that a beneficiary of a trust and the trust are considered to be at non-arms length unless the facts establish otherwise.

With respect to partnerships the Department is of the view that each partner is a mortgagor for the purposes of Regulation 4900 and it is a question of fact whether or not a partner is at arms length with the partnership.

Finally, the Department also would assume that a co-tenant is a mortgagor of property held in co-tenancy.

We trust these comments will be of assistance.

Yours truly,

for DirectorFinancial Industries DivisionRulings Directorate