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.
Dear Sir:
This is in response to your letter of August 13, 1990, wherein you requested our opinion in respect of a specified proposed transaction. The transaction concerns the use of funds from self-directed Registered Retirement Savings Plans ("RRSP") XXX
As noted in Information Circular 70-6R2, a copy of which is attached, we do not give opinions in respect of specific proposed transactions other than in response to an advance income tax ruling request. However, we will offer the following general comments.
A taxpayer is permitted to use the funds in a self-directed RRSP to purchase qualified investments. The term "qualified investment" is defined in paragraph 146(1)(g) of the Income Tax Act (the "Act") and section 4900 of the Regulations to the Income Tax Act. The criteria used to determine if a qualified investment has been acquired with RRSP funds depends on whether the mortgagor and the annuitant(s) are dealing at arm's length or not. The Department, in determining if two parties are dealing at arm's length, will consider such factors as whether the interest rate on the mortgage is a fair market value rate, if there is a waiver or a deferral of interest payments or if one party enters the transaction with an unfair advantage due to a special social or other relationship with the other party. Our Interpretation Bulletin IT-419 is enclosed for your consideration in this regard.
If the mortgagor is the annuitant under the plan or fund, as the case may be, or is a person with whom the annuitant does not deal at arm's length, a mortgage secured by real property situated in canada, may be a qualified investment by virtue of paragraph 4900(1)(j) of the Regulations only if it is insured under either the National Housing Act or by a corporation offering its services to the public in Canada as an insurer of mortgages and it is administered by an approved lender under the National Housing Act.
If the mortgagor and the annuitant do deal at arm's length, a mortgage secured by real property situated in Canada, or an interest therein is a qualified investment for a RRSP unless the mortgagor is the annuitant under the plan or fund.
We trust the foregoing is of assistance.
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© Her Majesty the Queen in Right of Canada, 1990
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© Sa Majesté la Reine du Chef du Canada, 1990
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