| 19(1) | File No. 5-9614 |
| R.B. Day | |
| (613) 957-2136 |
February 23, 1990
Dear 19(1)
Re: Subsection 15(2) of the Income Tax Act (the "Act")
This is further to our telephone conversation of February 20, 1990, wherein you request our confirmation of your understanding that the housing loan conditions set out in subparagraph 15(2)(a)(ii) of the Act need be met only at the time the loan is made and that the loan continues to be exempt from the provisions of subsection 15(2) of the Act regardless of whether A Ltd. continues to hold it or whether the loan is transferred to the subsidiary in the following situation:
1. 24(1)
2. 24(1)
3. 24(1)
4. 24(1)
Our Comments
In order to remain exempt from the application of subsection 15(2) of the Act, the borrower must establish that bona fide arrangements were made at the time the housing loan was made, for repayment thereof within a reasonable time. During the term of the loan, the borrower must also show that he is observing the original arrangements, that he is not in default on the loan or promissory note, and that he normally continues to inhabit the dwelling.
In the situation you describe, provided the repayment terms have not been changed and are still being satisfied and provided that no new loan has taken place for the purpose of refinancing (and that is a question of fact). 24(1)
We trust our comments will be of assistance.
Yours truly,
for DirectorBusiness and General DivisionSpecialty Rulings DirectorateLegislative and Intergovernmental Affairs Branch