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.
DM'S OFFICE (2) DM # 96-01175M
ASSOCIATE DEPUTY MINISTER (1)
ADM'S OFFICE (3)
PENDING
RETURN TO INCOME TAX RULINGS
AND INTERPRETATIONS DIRECTORATE
15TH FLOOR, ALBION TOWER
Signed on April 1, 1996
XXXXXXXXXX
Dear XXXXXXXXXX:
The Honourable Jane Stewart, Minister of National Revenue, has asked me to reply to your correspondence of November 20 and 21, 1995, concerning the conditions for holding a mortgage on your own property within your registered retirement savings plan. A copy of your correspondence was sent to this department by the Honourable Paul Martin, Minister of Finance, on February 7, 1996.
You state that you would like to use money borrowed from your registered retirement savings plan to fund the construction of a commercial building and secure it with a mortgage. However, you have been advised that the mortgage will not be a qualified investment without being insured. You question the purpose of the insurance requirement when the money is borrowed from your own registered retirement savings plan.
I would like to explain that the purpose of a registered retirement savings plan is to provide the annuitant with a tax deferred savings plan to fund retirement. In order to minimize the risk associated with such tax-deferred funds, there are restrictions on the investments that may be acquired by a registered retirement savings plan.
Generally, non-arm's length investments are not qualified investments. However, under the provisions of paragraph 4900(1)(j) of the Income Tax Regulations, a non-arm's length mortgage will be a qualified investment for a registered retirement savings plan if certain conditions are met. To qualify, the mortgage must each on real property situated in Canada, administered by an approved lender under the National Housing Act, and be insured under the National Housing Act or by a corporation offering its services to the public in Canada as an insurer of mortgages.
The purpose of insuring mortgages is to protect the plan from any losses that may result from a reduction in the value of the mortgaged property, so as to ensure that funds will be available to the annuitant upon retirement.
I trust my comments will be of assistance to you.
Yours sincerely,
Pierre Gravelle, Q.C.
M. Sarazin
957-2131
960785
March 13, 1996
All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5
© Her Majesty the Queen in Right of Canada, 1996
Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistributer de l'information, sous quelque forme ou par quelque moyen que ce soit, de facon électronique, méchanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.
© Sa Majesté la Reine du Chef du Canada, 1996
Email this Content