Investment by RRSP in mortgage was qualified investment

Taxpayers acquired self-directed RRSP which acquired interest in mortgage

INCOME TAX - Deferred income plans

Two taxpayers, husband and wife, acquired self-directed registered retirement savings plan (RRSP) which acquired interest in mortgage for consideration in amounts of $42,500 and $37,000 in 2000. Taxpayers were not sophisticated investors, they owned restaurant and had heard about investment opportunity, which involved development of campground/trailer park and they thought this was good investment because of significant oil and gas development in area. Taxpayers also received legal advice about investment from lawyer but in end, money taxpayers had invested in mortgage was stolen from them. Minister reassessed both taxpayers to include consideration amounts in taxpayer’s taxable income and levied gross negligence penalty against them. Taxpayers appealed. Appeal allowed. Paragraph 146(9)(b) of Income Tax Act did not apply in situation where taxpayer directed his/her RRSP to make investment with arm’s length party for what taxpayer believed was fair market value consideration and investment turns out to be bad investment. It was concluded, on evidence, that taxpayers dealt at arm’s length with lead promoter of sale of mortgage and three companies involved in sale of interest in mortgage. It was found that when taxpayers RRSP acquired undivided interest in mortgage, relevant RRSP’s acquired interest in mortgage and as result, investment by RRSP in mortgage was qualified investment.

Stewart v. The Queen (2019), 2019 CarswellNat 139, 2019 TCC 22, Steven K. D'Arcy J. (T.C.C. [General Procedure]).

Case Law is a weekly summary of notable civil and criminal court decisions by the Supreme Court of Canada, the Federal Court of Canada and all Ontario courts. These cases may be found online in WestlawNext Canada. To subscribe, please visit

Free newsletter

Our newsletter is FREE and keeps you up to date on all the developments in the Ontario legal community. Please enter your email address below to subscribe.

Recent articles & video

Downey should consult with bar and bench before overhauling judicial appointments, lawyers say

Boniferro’s term as deputy for the MAG to end in early 2020

Ontario government revamps simplified procedure to reduce delays for 2020

John Struthers named president of Criminal Lawyers’ Association

Surveillance and social media in personal injury cases

Church sex-abuse scandal shows importance of trials in society, says lawyer

Most Read Articles

Church sex-abuse scandal shows importance of trials in society, says lawyer

Why litigation financiers are flocking to Canada

2019 shook up everything from tribunals to the MAG

Judges don’t have ‘unfettered’ leeway on costs when settlement offers aren’t accepted