| 5-912676 | |
| 24(1) | M.P.Baldwin |
| (613) 957-8953 |
Attention: 19(1)
March 5, 1992
Dear Sirs:
Re: Self-Directed RRSP
This is in reply to your letter of September 18, 1991 requesting confirmation on whether or not a mortgage would be a qualified investment for RRSP purposes.
As noted in Information Circular 70-6R2, we do not express opinions on specific proposed transactions other than as a reply to an advance income tax ruling request. As a consequence thereof, we may only offer the following general comments.
Pursuant to subsection 4900(4) of the Income Tax Regulations ("the Regulations"), a mortgage secured by real property situated in Canada, or an interest therein, is a qualified investment for an RRSP unless the mortgagor is the annuitant of the RRSP, or is a person with whom the annuitant does not deal at arm's length. It is to be noted that it is a question of fact whether persons not related to each other are dealing with each other at arm's length.
Where the mortgagor is the annuitant of the RRSP or does not deal at arm's length with the annuitant, the mortgage may be a qualified investment by virtue of paragraph 4900(1)(j) of the Regulations provided it is in respect of real proprty situated in Canada, 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 is administered by an approved lender under the National Housing Act. As outlined in paragraph 9 of Interpretation Bulletin IT-320R2, other requirements to be met include
- the amount of the mortgage interest rate and other terms must reflect normal commercial practise, and
- the mortgage must be administered as if it were on property owned by a stranger.
If the above conditions are met, the mortgage would be a qualified investment for purposes of subparagraph 146(1)(g)(iv) of the Income Tax Act.
We trust the comments will be of assistance to you.
Yours truly,
for DirectorFinancial Industries DivisionRulings DirectorateLegislative and IntergovernmentalAffairs Branch