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.
Principal Issues:
Would a non-recourse mortgage secured by real property be considered a mortgage for the purposes of subsection 4900(4) of the Regulations?
Position TAKEN:
Yes
Reasons FOR POSITION TAKEN:
Under a non-recourse mortgage the lender has no recourse against the borrower personally or against any asset of the borrower except the real property against which the mortgage is registered. The non-recourse mortgage would be either a mortgage at law or, alternatively, it would be considered a mortgage under the inclusion found in paragraph 4901(3)(a) of the Regulations.
951609
XXXXXXXXXX M.P. Sarazin
Attention: XXXXXXXXXX
July 21, 1995
Dear Sirs:
Re: Subsection 4900(4) of the Income Tax Regulations
This is in reply to your letter dated June 16, 1995 wherein you requested our comments as to whether a non-recourse mortgage would be considered a mortgage for the purposes of subsection 4900(4) of the Income Tax Regulations (the "Regulations"). A non-recourse mortgage is a mortgage under which the lender has no recourse against the borrower personally for repayment of the debt and no recourse against any asset of the borrower except the real property against which the mortgage is registered.
For the purposes of subsection 4900(4) of the Regulations, paragraph 4901(3)(a) of the Regulations states that the reference to mortgage includes a charge, hypothec or similar instrument pertaining to real property. Since a non-recourse mortgage secured by real property represents a charge, hypothec or similar instrument pertaining to real property, we are of the view that a non-recourse mortgage secured by real property would qualify as a mortgage for the purposes of subsection 4900(4) of the Regulations provided that the mortgagor is not the annuitant under the registered retirement savings plan or registered retirement income fund, or is not a person with whom the annuitant does not deal at arm's length.
We trust the above comments will be of assistance to you.
Yours truly,
for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
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