30 November 1996 Ruling 9731423 - XXXXXXXXXX RULING

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:

XXXXXXXXXX Ruling.

Position TAKEN:

Standard rulings issued - unchanged from previous year.

Reasons FOR POSITION TAKEN: N/A

XXXXXXXXXX							973142
XXXXXXXXXX

Attention: XXXXXXXXXX

XXXXXXXXXX, 1997

Dear Sirs:

Re: XXXXXXXXXX

We are writing in response to your correspondence of XXXXXXXXXX wherein you requested an advance income tax ruling on behalf of the above referenced corporation.

You have advised that, to the best of the knowledge of yourself and that of responsible officials of XXXXXXXXXX, none of the issues in respect of which you have requested the ruling are being considered by a District Taxation Office or a Taxation Centre in connection with a tax return that has been filed and that none of the issues are under objection or appeal.

Our understanding of the relevant facts, the proposed transactions and the purpose of the proposed transactions is as follows:

STATEMENT OF FACTS

1. XXXXXXXXXX

2. XXXXXXXXXX

3. XXXXXXXXXX

4. The Canadian income tax treatment of XXXXXXXXXX issued before XXXXXXXXXX forms the subject of a series of advance income tax rulings, the most recent dated XXXXXXXXXX, 1996.

5. The rulings requested result from, inter alia, the obligation of the issuer of XXXXXXXXXX to disclose to potential investors the principal Canadian federal income tax consequences of purchasing, holding and disposing of XXXXXXXXXX.

PROPOSED TRANSACTIONS

1. Each pool of mortgages to be accumulated by the issuer

XXXXXXXXXX

XXXXXXXXXX

2. XXXXXXXXXX

3. XXXXXXXXXX will be paid an application fee and a guarantee fee (the "Fees") by

XXXXXXXXXX

4. XXXXXXXXXX

5. XXXXXXXXXX

6. XXXXXXXXXX

7. XXXXXXXXXX

8. XXXXXXXXXX

9. XXXXXXXXXX

PURPOSE OF THE PROPOSED TRANSACTIONS

It is anticipated that the issuance of additional XXXXXXXXXX will further the stated intent of the XXXXXXXXXX program which is to

XXXXXXXXXX

RULINGS GIVEN

Provided that the above statement of facts and the proposed transactions are accurate and constitute a complete disclosure of all relevant facts and proposed transactions, the following rulings are given:

A. Provided that it is reasonable in amount, the servicing fee referred to in paragraphs 7 and 8 of the Proposed Transactions will be deductible in computing the income of the Investor pursuant to section 9 of the Income Tax Act (the "Act") and the deduction thereof will not be limited by paragraph 18(1)(a) nor precluded by paragraph 18(1)(b) of the Act.

B. Investors, other than a "Financial Institution" within the meaning of that term as defined in subsection 142.2(1) of the Act, will be permitted to report for Canadian income tax purposes the net amount remitted to it by the Issuer as described in paragraph 8 of the Proposed Transactions. Consequently, amounts received or receivable as, on account or in lieu of payment of, or in satisfaction of interest paid or payable in respect of and at the rate specified in a XXXXXXXXXX, whether remitted by the Issuer or by XXXXXXXXXX pursuant to its guarantee as described in paragraph 2 of the Proposed Transactions, will be included in the income of an Investor resident in Canada pursuant to paragraph 12(1)(c) or subsection 12(3) of the Act, as such may be applicable in the circumstances.

C. XXXXXXXXXX

D. By virtue of the fact that the interest in respect of a XXXXXXXXXX will be paid on a monthly basis as described in paragraph 8 of the Proposed Transactions, for the purpose of subsection 12(4) of the Act, a XXXXXXXXXX will not be an "investment contract", as that term is defined in subsection 12(11) of the Act, in relation to an Investor.

E. Interest paid or credited in respect of a XXXXXXXXXX to an Investor who is not resident in Canada will be exempt from tax exigible pursuant to paragraph 212(1)(b) of the Act by virtue of subclause 212(1)(b)(ii)(C)(I) of the Act.

F. Provided that an Investor, that is not a "Financial Institution" within the meaning of that term as defined in subsection 142.2(1) of the Act, holds a XXXXXXXXXX as capital property, as that term is defined in section 54 of the Act, the amount of any gain or loss realized by the Investor upon a disposition of the XXXXXXXXXX will be a capital gain or a capital loss within the meaning of those terms in subsection 248(1) of the Act.

G. For purposes of subsection 214(7) of the Act, a XXXXXXXXXX is an "excluded obligation" within the meaning of paragraph 214(8)(a) of the Act by virtue of the fact that the interest paid or credited in respect thereof is exempt from tax under Part XIII of the Act by reason of subclause 212(1)(b)(ii)(C)(I) of the Act.

H. A XXXXXXXXXX will be a "qualified investment" for a registered retirement savings plan pursuant to paragraph (a) of that definition in subsection 146(1) of the Act, for a registered retirement income fund pursuant to paragraph (a) of that definition in subsection 146.3(1) of the Act and for a deferred profit sharing plan or a revoked plan pursuant to paragraph (b) of that definition in section 204 of the Act.

I. For purposes of section 116 of the Act, a XXXXXXXXXX is an "excluded property" within the meaning of paragraph 116(6)(d) of the Act.

J. Where an Investor, that is a "Financial Institution" within the meaning of that term as defined in subsection 142.2(1) of the Act, holds a XXXXXXXXXX that is "mark-to-market property", as that term is defined in subsection 142.2(1) of the Act, the amount of any income, gain or loss arising therefrom will be determined pursuant to section 142.5.

K. Where an Investor, that is a "Financial Institution" within the meaning of that term as defined in subsection 142.2(1) of the Act, holds a XXXXXXXXXX that is a "specified debt obligation" that is not a "mark-to-market property", as those terms are defined in subsection 142.2(1) of the Act, the amount of any income, gain or loss arising therefrom will be determined pursuant to sections 142.3 and 142.4.

These rulings are given subject to the limitations and qualifications set out in Information Circular 70-6R3 issued by Revenue Canada, Taxation on December 30, 1996 and are binding upon the Department in respect of XXXXXXXXXX issued after XXXXXXXXXX. Also, these rulings are based on the Act and the Income Tax Regulations in their present form and do not take into account the effects of any proposed amendments thereto.

Yours truly,

for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy & Legislation Branch