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.
RE: Application of Paragraph 212(13)(f) of
the Income Tax Act
This is in reply to your Round Trip Memorandum dated December 24, 1980 requesting our opinion as to the application of paragraph 212(13)(f) to the following situation.
Non-resident A purchased an apartment building situated in Canada and as part of the transaction, gave back a second mortgage to the vender who was a Canadian. When the second mortgage matured in 1980, another non-resident B lent funds to A to enable him to pay off the second mortgage.
The loan from B to A is a personal loan. It is not secured in any manner by real property situated in Canada or an interest therein. There are no collateral agreements between B and A under which it could be said that B secured his loan on the property in Canada or acquired any sort of interest in the property in Canada by way of security. Under the terms of the loan between B and A, in the event of non-payment, B's only recourse is against A personally.
Based on the above facts, it is our view that the indebtedness would not be caught within the meaning of paragraph 212(13)(f) because it is not secured by real property situated in Canada or an interest therein. We have been unable to find any support for your contention that by issuing a loan to pay off the second mortgage B would be considered as having an implied interest in that particular piece of real estate and would suggest therefore that the assessment of the withholding tax be discontinued unless you have further support for your position.
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© Her Majesty the Queen in Right of Canada, 1981
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© Sa Majesté la Reine du Chef du Canada, 1981
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