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 CCRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.
Principal Issues:
1. Can an RRSP sell property acquired under mortgage foreclosure?
2. Can the RRSP invest in another mortgage on the re-sold property?
Position:
1. Yes.
2. If conditions satisfied, yes.
Reasons:
1. This is covered in paragraph 12 of IT-320R3.
2. Nothing preventing a mortgage that meets all of the required conditions from being a qualified investment.
XXXXXXXXXX 2003-002120
June 12, 2003
Dear XXXXXXXXXX:
Re: Mortgages in Registered Retirement Savings Plans
We are writing in reply to your letter of May 28, 2003, wherein you requested our views regarding the sale of real property acquired by an RRSP as a result of a foreclosure on an investment in a mortgage. You ask whether the RRSP could sell the property and use the same mortgage with a new interest rate and varied terms and conditions.
The particular situation outlined in your letter appears to relate to a factual one, involving a specific taxpayer. As explained in Information Circular 70-6R5, it is not this Directorate's practice to comment on proposed transactions involving specific taxpayers other than in the form of an Advance Income Tax Ruling. Should your situation involve a specific taxpayer and a completed transaction, you should submit all relevant facts and documentation to the appropriate Tax Services Office for their views. However, we are prepared to offer the following general comments which may be of assistance.
The CCRA's general views on a RRSP acquiring property under a mortgage foreclosure are described in paragraph 12 of Interpretation Bulletin IT-320R3. Paragraph 12 of IT-320R3 states that the acquisition of property as a result of the foreclosure procedures will not be regarded as an acquisition of a property that is not a qualified investment if the property is offered for sale under reasonable conditions and it is sold within a reasonable period of time. We note that the property may be sold to anyone, including the former owner of the property, for its fair market value.
Once an RRSP acquires property as a result of a foreclosure on a mortgage, we would expect that the rights and obligations under that mortgage would cease to exist. However, this is a question of property law that should be addressed by a legal counsel specializing in the applicable property law statutes. Where the RRSP sells the property it acquired under the foreclosure procedures, there is nothing preventing the RRSP from investing in a new mortgage on the particular property where the conditions described in paragraph 11 of IT-320R3 are satisfied.
We trust that the above comments will be of assistance to you.
Yours truly,
Mickey Sarazin, C.A.
for Director
Financial Industries Division
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