Revenue Canada Taxation Head Office
M.S. Lalonde (613) 957-8959
November 10, 1986
Dear Sirs:
This is in reply to your letter of July 28, 1986 forwarded to us by Registered Pension and Deferred Income Plans Division. You have requested a confirmation that mortgages on land are qualified investments for a Registered Retirement Income Fund ("RRIF").
In our opinion, a mortgage secured by real property situated in Canada is a qualified investment as provided in paragraph 4900(l)(j) and subsection 4900(4) of the Income Tax Regulations in the following situations:
(a) in any case where the mortgage is administered by an approved lender under the National Housing Act and is insured under the National Housing Act or by a corporation offering its services to the public as an insurer of mortgages, or
(b) in any other case, where the mortgagor is not the annuitant under the plan and deals at arm's length with the annuitant.
Where an RRIF holds a mortgage on real property owned by the annuitant under the fund or a person with whom the annuitant does not deal at arm's length, it will be accepted as a qualified investment only if
i) the mortgage qualifies under (a) above,
ii) the amount of the mortgage interest rate and other terms reflect normal commercial practice; and
iii) the mortgage is administered as if it were a mortgage on property owned by a stranger.
We hope the above comments are of assistance to you.
Yours truly,
for Director Financial Industries Division Rulings Directorate Legislative and Intergovernmental Affairs Branch