5-920202
D.S. Delorey
(613) 957-8953
24(1)
Attention: 19(1)
February 5, 1992
Dear Sirs:
This is in reply to your letter of December 13, 199l concerning the situation where a registered retirement savings plan trust ("RRSP trust") acquires real property as a result of a default by the mortgagor.
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 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).
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 acquisition through foreclosure or other procedure 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 of time. A "reasonable period of time" is usually a year from the time of acquisition 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 Information Circular
70-6R2. We trust however that they are of assistance.
Yours truly,
for DirectorFinancial Industries DivisionRulings Directorate