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.
February 12, 1981.
PENSION & PROFIT SHARING PLANS SECTION REGISTRATIONS DIVISION
Mr. G.J. Murray Chief
NON-CORPORATE RULINGS DIVISION R.G. Gonsalves (5-0051)
Your T2003 concerning the letter dated January 20, 1981 from XXXX
We do not share the concern in the above letter that the mortgage foreclosure results in the deregistration of a self-administered RRSP. Rather, subsection 207.1(1) of the Act applies (Part XI.I tax) since RRSP holds a non-qualified investment. However, in such specific cases, our position has been not to apply Part XI.I tax where it is determined that:
1. The foreclosure action was necessitated by the need to protect the RRSP's mortgage investment and arose as a result of actions on the part of the mortgagor and
2. The RRSP held the real property acquired as a result of the fore- closure only for a temporary period of time to facilitate the disposition of the real property in question and the subsequent acquisition of a replacement investment that would be qualified investment for the RRSP under the Income Tax Act and Regulations.
'A temporary period of time' would approximate the average time required to sell a similar property through a registered realtor using the Multiple Listing Service.
In regard to an annuitant who originally transferred a mortgage to his self-administered RRSP, we see no objection to permit insertion of an appropriate clause in the Declaration of Trust or in the form letter which the annuitant signs at the time a mortgage is assigned to the plan, requiring the annuitant to assume the obligations of the mortgage at a point when the arrears reach a certain length of time or when the trustee determines foreclosure or power of sale proceedings should be initiated, by having the annuitant agree to exchange assets or buy back the mortgage. In our view, the exchange must take place at the time of reassignment. The annuitant shall be deemed by paragraph 69(1)(a) of the Act to have acquired the mortgage investment at its fair market value.
Notwithstanding our comments above, it should be noted that there are no provisions in the Act to permit such exchanges with the annuitant. Accordingly, we prefer to deal with specific cases on their merits.
We trust our comments are of assistance to you. As requested we return the letter under discussion.
for Director Non-Corporate Rulings Division
Encl. 207.1 RGG/cmr
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