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 ISSUE:
Whether mortgages secured by principal residences are qualified investments if the annuitant deal at arm’s length with the mortgagors..
Position TAKEN:
Yes if the residences are situated in Canada.
REASON FOR POSITION TAKEN:
Wording of subsection 4900(4) of the Regulation.
XXXXXXXXXX 5-990417
L. J. Roy, CGA
Attention: XXXXXXXXXX
February 24, 1999
Dear Sir:
Re: Qualified investments
This is in reply to your letter of February 17, 1999, wherein you requested a confirmation that the mortgages described in your letter would be qualified investments for a trust governed by a Registered Retirement Savings Plan (the "RRSP").
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. Questions concerning actual fact situations should otherwise be directed to your tax services office. 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.
Pursuant to subsection 4900(4) of the Income Tax Regulations, a mortgage secured by real property situated in Canada, or an interest therein, is a qualified investment for a trust governed by a RRSP unless the mortgagor is the annuitant of the RRSP, or is a person with whom the annuitant does not deal at arm's length pursuant to subsection 251(1) of the Income Tax Act.
Consequently, where the parties deal at arm’s length and the mortgage is secured by real property situated in Canada, the mortgage will be a qualified investment notwithstanding the terms of the mortgage including the mortgage interest rate.
We trust the above comments will be of assistance to you.
Manager
Financing and Plans Section
Financial Industries Division
Income Tax Rulings
and Interpretations Directorate
Policy and Legislative Branch
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