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 mortgage secured by real property constitute an interest in real property for purposes of clauses 149(1)(o.2)(ii)(A) and (B) of the Act?
Position: No.
Reasons: Under subsection 248(4), an interest in real property specifically excludes a mortgage secured by real property..
XXXXXXXXXX 981759
M. P. Sarazin
Attention: XXXXXXXXXX
September 25, 1998
Dear Sirs:
Re: Real Property and Mortgages Secured by Real Property
This is in reply to your letter dated June 26, 1998, wherein you asked whether investing in mortgages on real property would be considered investing in real property or an interest therein for the purposes of clauses 149(1)(o.2)(ii)(A) and (B) of the Income Tax Act (the “Act”).
It appears that the interpretation you seek relates to proposed transactions to be undertaken by specific taxpayers and, therefore, we bring to your attention Information Circular 70-6R3 dated December 30, 1996. Confirmation of tax consequences with respect to proposed transactions involving specific taxpayers will only be provided in response to a request for an advance income tax ruling. However, we are able to provide you with the following general comments.
Under the provisions of subsection 248(4) of the Act, it is clear that an interest in real property includes a leasehold interest in real property but does not include an interest as security only derived by virtue of a mortgage, agreement for sale or similar obligation. Since there is no provision exempting paragraph 149(1)(o.2) from the application of subsection 248(4) of the Act, a mortgage secured by real property would not satisfy the conditions found in clauses 149(1)(o.2)(ii)(A) and (B) of the Act.
You have commented that there appears to be no policy reason for preventing pension corporations from investing in mortgages secured by real property and they should be allowed to in order to be treated in the same manner as registered retirement savings plans, deferred profit sharing plans and registered retirement income funds. In order to have mortgages secured by real property added to the permitted activities and investments found in clauses 149(1)(o.2)(ii)(A) and (B) of the Act, the matter would have to be taken up with the Department of Finance.
We trust these comments will be of assistance.
Yours truly,
Paul Lynch
for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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