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: Do cousins deal with each other at arm’s length?
Position: Probably but question of fact.
Reasons: Generally, they would not be connected by blood.
XXXXXXXXXX 5-990226
Fouad Daaboul
Attention: XXXXXXXXXX
March 18, 1999
Dear Sirs:
Re: Cousin Relationship and Holding a Mortgage in a Self-Directed RRSP
This is in reply to your letter of January 20, 1999, wherein you requested a written ruling concerning the qualification of a mortgage investment in a self-directed RRSP where the borrower is the cousin of the RRSP annuitant’s spouse.
Written confirmation of the tax implications inherent in particular proposed transactions are given by this Directorate only where the transactions are outlined in an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R3 dated December 30, 1996. Although we cannot provide a specific answer or a ruling with regard to your query, we offer the following general comments which are not binding on the Department.
Paragraph 251(1)(a) of the Income Tax Act (the “Act”) deems related persons not to deal with each other at arm's length. According to paragraph 251(2)(a) of the Act, individuals connected by blood relationship, marriage, or adoption are related persons. The Department’s general views on connected by blood relationship, marriage or adoption can be found in Interpretation Bulletin IT-419R. However, paragraph 251(1)(b) of the Act provides that, at a particular time, it is a question of fact whether unrelated persons are dealing with each other at arm's length.
Depending on the relationship between the mortgagor and the mortgagee, subsection 4900(4) or paragraph 4900(1)(j) of the Income Tax Regulations would determine whether or not a particular mortgage will be a qualified investment.
We trust our comments will be of assistance to you.
Yours truly,
Paul Lynch
for Director
Financial Industries Division
Income Tax Rulings
and Interpretations Directorate
All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5
© Her Majesty the Queen in Right of Canada, 1999
Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistributer de l'information, sous quelque forme ou par quelque moyen que ce soit, de facon électronique, méchanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.
© Sa Majesté la Reine du Chef du Canada, 1999
Email this Content