| 7-921933 | |
| D. Duff | |
| 957-8953 |
July 6, 1992
Registered Plans DivisionFinancial Industries DivisionS.M. KotlarDirector
Attention: Lyne Aubin-Morrisset
RRSPs issuing non arm's length mortgages at non-market rates
24(1)
To meet the conditions for a qualified investment for an RRSP in regulation 4900(1)(j) such mortgages need only be insured and administered as indicated therein. However, where the administrator, who is also the trustee, agrees to a mortgage at a rate less than market, or agrees to other terms more favourable than market conditions, it is our position that an advantage is being extended to the annuitant as envisaged by paragraph 146(2)(c.4). Accordingly, the issuer is liable to a penalty pursuant to subsection 146(13.1)
Furthermore, where the issuer agrees to a mortgage with the annuitant as the mortgagor, at an interest rate in excess of market, it is our position that such payments in respect of the interest in excess of the market rate would be a contribution to an RRSP and Part X.1 tax could be applicable to these contributions.
for DirectorFinancial Industries DivisionRulings Directorate