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.
XXXX
W.E. Baumeister (613) 995-0051
November 19, 1982
Dear Sirs:
We have for reply your letter of November 4, 1982, regarding self-directed RRSP's holding mortgages that are qualified investments for an RRSP under subsection 4900(4) of the Income Tax Regulations.
If a mortgagor defaults on his payments and the RRSP trust takes the necessary foreclosure actions against that mortgagor and, as a result, acquires real property, the provisions of subsection 146(10) of the Income Tax Act will normally apply. That subsection stipulates that when an RRSP trust acquires a non-qualified investment (i.e. real property), the fair market value of the property at the time of acquisition must be included in computing the income for that year of the annuitant under the plan.
However, the Department is prepared not to apply the provisions of subsection 146(10), if the original mortgage investment was a qualified investment and if
(a) foreclosure vas necessary to protect the investment of the RRSP and was a result of actions or default of actions on the part of the mortgagor; and
(b) the RRSP trust held the real property for the sole purpose of disposing of it and did dispose of it within a reasonable period.
A "reasonable period" may extend beyond the year of foreclosure provided that the delay can be justified having regard to the facts of the particular case.
When the RRSP trust acquires a non-qualified investment, no tax will be payable by the trust under subsection 207.1(1) of the Act, since this tax is levied only in respect of property that was a qualified investment when it was acquired but has since ceased to be a qualified investment. The tax also does not apply to property held by the trust where the fair market value of the property was included in computing the annuitant's income under subsection 146(10) of the Act.
Since we are not aware whether the Department of Finance has given consideration to waiving the Part XI.1 tax, you may wish to direct your enquiry directly to that Department. In connection with extending the period for disposal of non-qualified investments (i.e. real property) by the RRSP trust, see our comments above under "reasonable period".
Yours truly,
for Director Non-Corporate Rulings Division
WEB :ta
File: 146(10) 207.1
All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5
© Her Majesty the Queen in Right of Canada, 1982
Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistributer de l'information, sous quelque forme ou par quelque moyen que ce soit, de facon électronique, méchanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.
© Sa Majesté la Reine du Chef du Canada, 1982
Email this Content