An individual, who is an RRSP annuitant, borrows the “Mortgage Loan” from the RRSP, with a principal residence mortgage granted in favour of the RRSP as security. The Mortgage Loan would be administered by an approved lender under the National Housing Act and would be insured as required by Reg. 4900(1)(j.1) by an approved private insurer. The Mortgage Loan proceeds would be used to make an interest-free shareholder loan to a corporation (the “Corporation”) in which the individual held shares and controlled, with the Corporation paying off a corporate line of credit. Is the Mortgage Loan a qualified investment, and is the individual’s use of the funds received on the Mortgage Loan to make the shareholder loan an eligible use of the RRSP’s property? Before going on to address the advantage and prohibited investment rules in Part XI.01, and after indicating that the Mortgage Loan would be a qualified investment under Reg. 4900(1)(j.1), CRA stated:
There are no express restrictions under paragraph 4900(1)(j.1)…on the individual’s use of the funds received on the Mortgage Loan.