Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues: May a RRIF loan money to a corporation which is owned 100% by persons related to the annuitant?
Position: No
Reasons: A loan to a closely-held, private corporation is not a qualified investment.
June 7, 2000
XXXXXXXXXX
Dear XXXXXXXXXX:
I am replying to correspondence of March 14, 2000, from XXXXXXXXXX of your office, addressed to my Special Assistant, Ms. Julie Boudria, on behalf of your constituents, XXXXXXXXXX, concerning their registered retirement income funds (RRIF).
XXXXXXXXXX would like to use their RRIF to make a loan to a corporation owned by their sons. Generally, a loan to a closely-held private corporation is not a qualified investment for a RRIF trust under the Income Tax Act and the Income Tax Regulations. However, a mortgage on real property located in Canada may be a qualified investment under certain conditions. Pursuant to paragraph 4900(l)(j) of the Regulations, a mortgage in respect of real property situated in Canada will be a qualified investment for a RRIF trust if the mortgage is insured under the National Housing Act (or by a corporation offering its services to the public in Canada as an insurer of mortgages) and the mortgage is administered by an approved lender under the National Housing Act.
In addition, the terms and conditions of the mortgage must reflect normal commercial practice and.this requirement is discussed in more detail in paragraph 9 of interpretation bulletin IT 320R2 Registered Retirement Savings Plans - Qualified Investments, a copy; of which is attached for your information. Should XXXXXXXXXX have any questions concerning this matter, I invite them to contact Ms. Patricia Spice, Manager of the Deferred Income Plans Section at the Income Tax Rulings Directorate, by telephoning 1-613-957-8979. Her fax number is 613-957-2088.
Ms. Spice is aware of our correspondence and will be pleased to be of assistance.
I trust that the information provided will assist you in replying to your constituents.
Yours sincerely,
Martin Cauchon, P.C., M.P. Attachment
S.E. Thomson
952-9853
April 4, 2000
2000-001691