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:
Can RRSP annuitant collect payments under an RRSP mortgage
Position:
Not covered by tax law. may be covered under trust law
Reasons:
no basis for comment under the Act
XXXXXXXXXX 5-961797
Attention: XXXXXXXXXX
June 10, 1996
Dear Sirs:
Re: Arms' Length Mortgages held in RRSPs.
This is in reply to your letter of May 13, 1996, further to our letter of May 11, 1996 (file 961167).
Subsection 4900(4) of the income Tax Regulations (the "Regulations") provides that a mortgage secured by real property situated in Canada is a qualified investment of an RRSP unless the mortgagor is the annuitant under the plan or is a person with whom the annuitant does not deal at arms length. Paragraph 4900(1)(j) also provides that a mortgage in respect of real property situated in Canada is a qualified investment if it is insured under the National Housing Act or by a corporation offering its services to the public in Canada as an insurer of mortgages, and it is administered by an approved lender under the National Housing Act.
If the annuitant of the RRSP is the mortgagor or is related to the mortgagor the Department accepts that a mortgage will be a qualified investment for an RRSP in accordance with subsection 4900(1)(j) of the Regulations. However in this case we also require that the mortgage must be administered as if it were a mortgage on property owned by a stranger.
The income tax Act and Regulations do not specify what the terms of an arms' length mortgage must be or whether it would be appropriate for the annuitant of the RRSP to collect the mortgage payments on behalf of the trustee of the plan. However we would expect that the laws governing trustees may have application and suggest that you may wish to review this with your legal advisors.
We trust our comments will be of assistance to you.
Yours truly,
for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
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