1999 Ruling 9931623 - mortgage backed securities

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 Rulings

Position: OK

Reasons: Standard Ruling issued. Unchanged from prior year.

XXXXXXXXXX
XXXXXXXXXX 993162
XXXXXXXXXX

Attention: XXXXXXXXXX

XXXXXXXXXX, 1999

Dear Sirs:

Re: XXXXXXXXXX ("CCO")
Advance Income Tax Ruling -XXXXXXXXXX

This is in response to your letter of XXXXXXXXXX, requesting an advance income tax ruling on behalf of the above-noted taxpayers.

We understand that to the best of your knowledge and that of the taxpayers involved none of the issues involved in this ruling request are being considered by a Tax Services Office or a Taxation Centre in connection with any tax return already filed, and none of the issues involved in the requested rulings is the subject of any notice of objection or is under appeal.

In this letter "the Act" means the Income Tax Act, RSC 1985, Fifth Supplement, c.1, as amended from time to time.

Facts

1.

XXXXXXXXXX

2.

XXXXXXXXXX

3.

XXXXXXXXXX

4. XXXXXXXXXX:

a) XXXXXXXXXX;

b) XXXXXXXXXX;

c) XXXXXXXXXX;

d) XXXXXXXXXX; and

e) XXXXXXXXXX.

5. 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, 1998.

Proposed Transactions

6. Each pool of mortgages to be accumulated by an issuer of

XXXXXXXXXX

XXXXXXXXXX

XXXXXXXXXX:

a) XXXXXXXXXX;

b) XXXXXXXXXX;

c) XXXXXXXXXX;

d) XXXXXXXXXX:

XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX

XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX

e) XXXXXXXXXX; and

f) XXXXXXXXXX.

XXXXXXXXXX:

XXXXXXXXXX

XXXXXXXXXX

XXXXXXXXXX

XXXXXXXXXX

XXXXXXXXXX

XXXXXXXXXX

XXXXXXXXXX

• XXXXXXXXXX
• XXXXXXXXXX
• XXXXXXXXXX

XXXXXXXXXX

XXXXXXXXXX

7.

XXXXXXXXXX

will be paid an application fee by XXXXXXXXXX.

8.

XXXXXXXXXX

a) XXXXXXXXXX;

b) XXXXXXXXXX;

c) XXXXXXXXXX;

d) XXXXXXXXXX; and

e) XXXXXXXXXX.

9.

XXXXXXXXXX

10.

XXXXXXXXXX

11.

XXXXXXXXXX

12.

XXXXXXXXXX

13.

XXXXXXXXXX

14.

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

Provided that the preceding statements constitute a complete and accurate disclosure of all of the relevant facts, proposed transactions and the purpose of the proposed transactions, and provided that the proposed transactions are completed in the manner described above, our rulings are as follows:

A. Amounts received or receivable as, on account or in lieu of payment of, or in satisfaction of interest in respect of a XXXXXXXXXX, whether through the Issuer or by XXXXXXXXXX pursuant to its guarantee as described in paragraph 7 above 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.

B. Provided that it is reasonable in amount, the servicing fee referred to paragraph's 11 and 12 above will be deductible in computing the income of the Investor pursuant to section 9 of 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. Consequently, 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 12 above.

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 10 above, 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 subsection 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 subclasue 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 a "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 of the Act.

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 of the Act.

These rulings are given subject to the general limitations and qualifications set out in Information Circular IC 70-6R3 dated December 30, 1996, and are binding on the Agency 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 and Legislation Branch