Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues: Can a mortgage held by an RRSP which is a qualified investment pursuant to paragraph 4900(1)(j) of the regulations (annuitant of RRSP is the mortgagor) be increased without a tax consequence?
Position: Yes
Reasons: As long as the increased mortgage continues to satisfy the requirements of paragraph 4900(1)(j) of the regulation, it will continue to be a qualified investment for the RRSP.
XXXXXXXXXX 2001-008387
G. Kauppinen
June 18, 2001
Dear XXXXXXXXXX:
Re: Registered Retirement Savings Plans ("RRSP") - Qualified Investments
This is in reply to your facsimile transmission dated May 10, 2001 regarding mortgages held as investments by RRSPs.
In the typical scenario that you describe, the annuitant of an RRSP owns a home on which there is a mortgage held as a qualified investment by the RRSP. The RRSP has additional cash assets and the fair market value of the home is in excess of the mortgage (i.e., there is equity in the home).
The homeowner wishes to obtain cash by taking out a 2nd mortgage on the home. The homeowner wishes the RRSP to hold the 2nd mortgage.
This is to confirm that as long as the 2nd mortgage satisfies the requirements of paragraph 4900(1)(j) of the Income Tax Regulations as described in paragraph 9(a) of Interpretation Bulletin IT-320R2, Registered Retirement Savings Plans - Qualified Investments, the 2nd mortgage will be a qualified investment to the RRSP.
Note that for income tax purposes, the foregoing comments continue to be applicable if, instead of taking out a 2nd mortgage on the home, the outstanding principal of the original mortgage is simply increased.
We trust our comments will be of assistance to you.
Yours truly,
Roberta Albert, CA
for Director
Financial Industries Division
Income Tax Rulings Directorate
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