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.
961766
XXXXXXXXXX Jim Wilson
(613) 957-2123
Attention: XXXXXXXXXX
May 17, 1996
Dear Sirs:
Re: Section 116 Certificate and a Non-Resident Mortgagee
This is in reply to your letter of May 7, 1996, wherein you request our views on the application of section 116 of the Income Tax Act in a situation where a non-resident mortgagee of real property located in Canada sells the property by a power of sale in circumstances where the mortgagor is also a non-resident.
As your request would appear to deal with a factual and, possibly completed transaction rather than a hypothetical situation, we are unable to provide our views with respect to the specific transaction which is the subject of your request. Further to paragraph 21 of Information Circular 70-6R2, interpretation requests relating to proposed transactions should be submitted in the form of an advance ruling request, while requests for a written opinion on a completed transaction should be addressed to the appropriate Tax Services Office of Revenue Canada. Nevertheless, we are prepared to make the following comments which may or may not apply to your situation.
It is our understanding that, where a mortgagee exercises a power of sale pursuant to the terms of the mortgage, a court order or the provisions of the relevant Mortgage Act, title passes directly from the mortgagor to the third party purchaser. Therefore, as stated in our reply to question #6 at the 1988 Canadian Tax Foundation Annual Conference Revenue Canada Roundtable, provided the creditor does not obtain title to the property, liability for tax under subsection 116(5) or 116(5.3) does not extend to a mortgagee where the property is sold pursuant to a power of sale. However, subsection 116(5) or 116(5.3) will apply to the purchaser. When the Department's Information Circular 72-17R4 next comes up for revision, paragraph 48 thereof will be amended to reflect this position.
We trust you will find the above comments of some assistance.
Yours truly,
for Director
Reorganizations and International Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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