| 24(1) | 5-902845 |
| M.P. Baldwin | |
| (613) 957-3499 |
19(1)
November 6, 1990
Dear Sirs:
Re: Registration 24(1)
This is in reply to your letter of July 3, 1990, wherein you requested information on investing in mortgages by an RRSP.
The criteria for a mortgage to be a qualified investment for an RRSP is set out in paragraph 4900(1)(j) and subsection 4900(4) of the Income Tax Regulations (the "Regulations"). The rules are also explained in Interpretation Bulletin IT-320R and a Special Release to IT-320R of which we have enclosed a copy.
The following are general comments concerning qualified mortgages in an RRSP. Paragraph 4900(1)(j) of the Regulations states that the mortgage must be administered by an approved lender under the National Housing Act and must be insured under the National Housing Act or by a corporation offering its services to the public as an insurer of mortgages. It is the Department's view that in order to meet the requirements set out in paragraph 4900(1)(j) of the Regulations a non-arm's length mortgage must not contain terms and conditions that are substantially different from those that would be round in an arm's length mortgage in the same circumstances.
Subsection 4900(4) of the Regulations requires that the mortgage be secured by real property situated in Canada and that the mortgagor is not the annuitant under the plans and deals at arm's length with the annuitant.
It should be noted that the provisions of paragraph 4900(1)(j) and subsection 4900(4) of the Regulations operate independently.
The above comments reflect only expressions of opinion which, as stated in paragraph 24 of Information Circular 70-6R2, are not binding on the Department. We trust however, that they will be of assistance to you.
Yours truly,
for DirectorFinancial Industries DivisionRulings Directorate