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 Department. Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
931283
XXXXXXXXXX J. Stalker
(613) 957-3499
May 14, 1993
Dear Sirs:
Re: Mortgage Investment Corporations Section 130.1 of the Income Tax Act (the "Act")
We are writing in response to your letter dated April 23, 1993 in which you requested our confirmation of the tax treatment of a subsidiary of a Mortgage Investment Corporation ("MIC").
Your letter refers to a situation in which a corporation which is a MIC within the meaning of subsection 130.1(6) of the Act wishes to incorporate a wholly-owned subsidiary, in order to isolate security to be granted under new financing arrangements. You ask if the subsidiary would be considered to be a MIC and if dividends paid by the subsidiary to its shareholder would be deemed to be received as interest pursuant to subsection 130.1(2) of the Act.
We note initially that the Department does not comment on proposed transactions other than by way of advance income tax rulings. If this is in fact a specific proposal, you may wish to consider requesting an advance ruling following the procedures outlined in Information Circular 70-6R2 dated September 28, 1990. We do however offer the following comments which are of a general nature.
The definition of a MIC in paragraph 130.1(6)(d) requires that the number of shareholders of the corporation be not less than twenty and that no one shareholder hold more than 25% of the issued shares of the capital stock of the corporation. It is our opinion that a wholly-owned subsidiary would not meet this shareholding test, and consequently would not qualify as a MIC.
Our comments are provided pursuant to the practice referred to in paragraph 21 of Information Circular 70-6R2 and, accordingly, are not binding upon the Department with respect to any particular transaction. Nevertheless we hope this will be of assistance.
Yours truly,
for Director Financial Industries Division Rulings Directorate
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