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.
REVENU CANADA TAXATION MEMORANDUM
DATE May 3, 1989
TO - VICTORIA DISTRICT OFFICE Public Affairs Division (1228 106 0 0)
FROM HEAD OFFICE Financial Industries Division M. Shea-DesRosiers (613)957-8953
Attention: Mr. Dan McGrath, Manager
SUBJECT: Self-Administered RRSP - Mortgage Investment
Your memorandum of December 15, 1988 addressed to Assessing Hotline has been referred to us for reply.
Assuming that it is the current commercial practice to provide for a penalty where excess mortgage payments are made, and since paragraph 4900(1)(j) of the Income Tax Regulations does not prohibit such a clause in a non- arm's length mortgage transaction, it is our opinion that such a penalty provision (in your case 3 months interest) would not disqualify the mortgage investment. While it is true that the taxpayer could increase the amount held in his self-administered RRSP by paying the penalty, he will be taxed at the time he withdraws the money from his self-administered RRSP.
We trust the above comments will be of assistance to you.
Chief Deferred Income Plans & Trusts Section Financial Industries Division Rulings Directorate
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© Her Majesty the Queen in Right of Canada, 1989
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© Sa Majesté la Reine du Chef du Canada, 1989
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