5-911460
19(1)
Dear Sirs:
Re: Your reference R.R.S.P. 188-5 Non-qualified investments held in Self-Directed Registered Retirement Savings Plans (RRSP)
Your letter of May 9, 1991 addressed to the Registered Plans Division has been referred to this Division for reply.
24(1)
Your enquiry related to a specific proposed transaction. As indicated in Information Circular 70-6R2 (copy enclosed), we do not provide written opinions on such transactions other than in reply to an advance income tax ruling request submitted in the manner set out in that bulletin. The following comments are therefore of a general nature only.
Real property is not a qualified investment for an RRSP trust. Where an RRSP trust acquires real property:
(a) subsection 146(10) of the Income Tax Act (the "Act") provides that the fair market value ("FMV") of that property is to be included in the annuitant's income, and
(b) for each month that it holds the property, subsection 207.1(1) of the Act provides that the trust shall pay a tax of 1% of the FMV of the property, other than property the FMV of which was included in the annuitant's income under subsection 146(10) of the Act.
However, the Department is prepared not to apply the provisions of either subsection 146(10) or 207.1(1) of the Act provided that
(c) the original mortgage investment of the RRSP trust was a qualified investment,
(d) the foreclosure was necessary to protect the mortgage investment of the trust and was a result of actions or default of actions on the part of the mortgagor, and
(e) the RRSP trustee holds the real property in the trust for the sole purpose of disposing of it and in fact does dispose of it within a reasonable period. A "reasonable period" is usually a year from the time of foreclosure but may extend beyond a year provided any delays can be justified having regard to the facts of the particular case.
The above comments are an expression of opinion only and are not binding on the Department, as explained in paragraph 21 of the enclosed Information Circular 70-6R2. We trust however that they are of assistance to you.
Yours truly,
for DirectorFinancial Industries DivisionRulings Directorate