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.
XXXXXXXXXX David R.Senécal
December 21, 1994
Re: Section 116 Certificate and a Non-resident Mortgagee
This is in reply to your letter of August 24, 1994, wherein you request our opinion as to the application of section 116 of the Income Tax Act (the "Act") to the following situation:
•XXXXXXXXXX is a non-resident mortgagee of real property located in Canada:
•A, the mortgagor, is a resident of Canada for purposes of the Act;
•B, the third party purchaser, is a resident of Canada for purposes of the Act; and
•Pursuant to the terms of the mortgage, XXXXXXXXXX exercises the power of sale to dispose of the property to B resulting in XXXXXXXXXX and B entering into an Agreement of Purchase and Sale which was to have closed on XXXXXXXXXX
As your request deals with a factual and, apparently, completed transaction rather than a hypothetical situation, we are unable to provide our views with respect to the actual transactions in question.
Further to paragraph 21 of Information Circular 70-6R2, interpretation requests relating to contemplated transactions should be in the form of an advance ruling request, while requests for a written opinion on a completed transaction should be addressed to the appropriate district office of Revenue Canada. Nevertheless, we are prepared to make the following comments which may or may not apply to your situation.
It is our understanding that, where a mortgagee exercises a power of sale pursuant to the terms of the mortgage, a court order or the provisions of the relevant Mortgage Act, title passes directly from the mortgagor to the third party purchaser. Therefore, where title to the property has passed from a resident vendor/mortgagor to a resident purchaser, albeit through a power of sale by a non-resident mortgagee, the provisions of section 116 of the Act will not apply.
The foregoing comments are given in accordance with the practice referred to in paragraph 21 of the above-mentioned Information Circular and are not binding on Revenue Canada.
Reorganizations and Foreign Division
Policy and Legislation Branch
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