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:
Will a loan to a strata condominium corporation be a debt secured on property "included within a housing project" for the purpose of subparagraph 130.1(6)(f)(i) of the Act?
Position:
Based on our general understanding that a strata corporation would hold title to the land and exterior of the condominium building if that property could be used as security then it should qualify.
Reasons:
Wording of the Act - See above.
XXXXXXXXXX 991137
June 22, 1999
Dear Sir:
Re: Housing Projects and Subparagraph 130.1(6)(f)(i)
This is in reply to your letter of April 22, 1999, wherein you requested our views on whether a loan to a "strata corporation" would qualify as a debt secured on property included within a housing project for the purposes of the definition of mortgage investment corporation ("MIC") in subsection 130.1(6) of the Income Tax Act (the "Act").
Your request appears to relate to either a proposed transaction or a completed transaction. Confirmation of the income tax consequences of proposed transactions involving specific taxpayers will only be provided in response to a request for an advance income tax ruling. To make such a request the advance income tax ruling must be submitted in accordance with the guidelines set out in Information Circular 70-6R3 (IC-70-6R3) dated December 30, 1996, issued by Revenue Canada. However, if the situation relates to a completed transaction a request for the Department's views must be made to your local Tax Services Office. Although we are not able to comment specifically on the situation described in your letter we can offer the following general comments.
The rules in the Act pertaining to MICs were first introduced (back in the early 70's) in response to a need to increase the flow of private sector financing into residential housing in Canada. Subparagraph 130.1(6)(f)(i) of the Act does not provide a specific definition of the terms "house" or "housing project" but instead, refers to definition of those terms in section 2 of the National Housing Act ("NHA"). Subsection 2(1) of the NHA defines a house to include "...any interest in land appurtenant to the building..." and a housing project as, "...a project consisting of one or more houses, one or more multiple-family dwellings, housing accommodation of the hostel or dormitory type, one or more condominium units or any combination thereof, together with any public space, recreational facilities, commercial space and other buildings appropriate to the project, but does not include a hotel".
Our general understanding of strata condominium corporations is that such corporations ordinarily would have title to the land and exterior shell of the condominium building while the individual unitholder would have title to his/her particular condominium unit or suite. It is our view that to the extent that the land and building is not otherwise excluded from the above definitions of house or housing project (i.e., due to the fact that the land is not "appurtenant" to the building or the building is not "appropriate" to the project) a loan that is secured on the land and exterior shell of the condominium complex would qualify as property included within a housing project under subparagraph 130.1(6)(f)(i) of the Act.
We would also point out that the reference to the Residential Mortgage Financing Act that appeared in the former version of subparagraph 130.1(6)(f)(i) of the Act is no longer applicable as a result of the passage of Bill C-28 on June 18, 1998 and that this change is effective from June 23, 1993.
Therefore while we hope that our comments are of assistance to you, as indicated in paragraph 22 of IC-70-6R3, this opinion is not a ruling and accordingly, it is not binding on Revenue Canada.
Yours truly,
F. Lee Workman
Manager
Financial Institutions Section
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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