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Syndicate Mortgage Loss
January 22, 2023
9:47 am
Flds
ON
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November 5, 2021
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Hello,
I have a concern on the following and I need some advise.

Syndicate Mortgage Invested in 2015. I received 2 T5 slips for 2016/17 after that interest payments were stopped. The mortgage was tied up to a property in Toronto. The mortgage company went to court to discharge the mortgage, the court’s decision in 2021 was to sell the property. Property was sold for $46 million. Court orders to distribute the proceeds among 325 plus investors. First to the lenders, Second to the registered investors, Third to the non-registered investors. I was in the third category to receive the funds. So, I received only 52% of my investments in 2022. The first 2 categories received in full. I received an email with an attachment “Investment Loss Report”. Email says the report can be used for tax purposes. The company will not be sending any ‘T’ slips in future.

My question is, Can I claim losses on Syndicate Mortgage? If so, what forms to fill in, along with our Tax Returns.

I was given to understand Schedule 3 is the form to be used. If so, on what line in schedule 3, should I be filling in my losses? What about line 25200 and 25300 on page 3 of the Tax Return. Can I claim the loss on those lines. Are Syndicate Mortgages, Capital or Non-Capital? Another advised was to fill in form T5013, this form has to be mailed separately to CRA.

Your expert advice, would be appreciated.
Thanks
FLDS

January 22, 2023
1:27 pm
butterflycharm
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April 19, 2019
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Flds said
Hello,
I have a concern on the following and I need some advise.

Syndicate Mortgage Invested in 2015. I received 2 T5 slips for 2016/17 after that interest payments were stopped. The mortgage was tied up to a property in Toronto. The mortgage company went to court to discharge the mortgage, the court’s decision in 2021 was to sell the property. Property was sold for $46 million. Court orders to distribute the proceeds among 325 plus investors. First to the lenders, Second to the registered investors, Third to the non-registered investors. I was in the third category to receive the funds. So, I received only 52% of my investments in 2022. The first 2 categories received in full. I received an email with an attachment “Investment Loss Report”. Email says the report can be used for tax purposes. The company will not be sending any ‘T’ slips in future.

My question is, Can I claim losses on Syndicate Mortgage? If so, what forms to fill in, along with our Tax Returns.

I was given to understand Schedule 3 is the form to be used. If so, on what line in schedule 3, should I be filling in my losses? What about line 25200 and 25300 on page 3 of the Tax Return. Can I claim the loss on those lines. Are Syndicate Mortgages, Capital or Non-Capital? Another advised was to fill in form T5013, this form has to be mailed separately to CRA.

Your expert advice, would be appreciated.
Thanks
FLDS  

Probably file it as you would with capital loss. I am not sure.

Side note: If there are enough unregistered users, wouldn't the business be tempted to go bankrupt? why should anyone go unregistered? are all private lending (personal) to real-estate non-registered?

January 22, 2023
1:39 pm
AltaRed
BC Interior
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Since you received T5 slips in earlier years and not a T5013, you are not a limited or general partner in this company. You have simply been a source of capital (lender) to this company.

You thus have a capital loss that goes in Schedule 3. Look at the tax guide for the appropriate line to claim this loss. I dont have the time to delve into that for you.

January 22, 2023
4:44 pm
Bill
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Sounds like a capital loss to me too, somewhere on Schedule 3. Link below gives you info that should tell you where best to put it. I've found in the past that if it belongs on Schedule 3 they don't get too excited if it's in the wrong section as a simple misclassification among the 8 options doesn't change total on line 10 of the Schedule.

If you're saying the loss occurred in 2022 then line 25300 (on page 5 of the return) would not apply as that line's for capital losses of other years. Line 25200 is neither for capital losses or for the current year.

https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/personal-income/line-12700-capital-gains/completing-schedule-3.html

January 22, 2023
4:46 pm
Flds
ON
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November 5, 2021
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Hello butterflycharm, AltaRed.

Thanks for your response.
I will be entering my losses in Schedule 3 - Property type - 6, line 15499 and 15500.

At the bottom of page 2 it says "Your latest notice of assessment
or reassessment will give you the amount of the loss that you can use to reduce your taxable capital gains of other years." I did not have any capital gains in the past or will I ever have any capital gains in the future. I will never invest.

I will wait and see my Notice of Assessment.

Thanks for your help
FLDS

January 23, 2023
9:11 am
Norman1
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Flds said
…I will be entering my losses in Schedule 3 - Property type - 6, line 15499 and 15500.

That doesn't sound correct. It should be type 5 (Bonds, debentures, promissory notes, and other similar properties), lines 15199 and 15300 because you were not an owner of a mortgage registered as such in the land titles office.

According to documents like the BC Securities Commission Rule 45-501,

“syndicated mortgage” means a mortgage in which two or more persons participate, directly or indirectly, as lenders in the debt obligation that is secured by the mortgage.

You likely invested in some kind of debt obligation or bond issued by a company, like a mortgage investment corporation, that was secured by a third mortgage and not invested in a third mortgage.

So, you likely have a bond that went bad and not a mortgage that went bad.

January 25, 2023
6:07 am
Flds
ON
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Hello Bill & Norman1,

Thanks for your response.
Bill - Thanks for your input on schedule 3 and the link it will be helpful.
Norman1 - Thanks for your explanation it does make sense I will use type 5. Also for the PDF link.

Best Regards
FLDS

January 25, 2023
6:43 am
Norman1
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The Capital Gains Guide 2022 (T4037) from CRA discusses capital gains, including how to report them on Schedule 3.

You may wish to double check your situation with the instructions in the guide.

Type 6 (Other mortgage foreclosures and conditional sales repossessions), lines 15499 and 15500, are for reporting gains or losses from property one has or lost from foreclosure or repossession:

Other mortgage foreclosures and conditional sales repossessions
Report these dispositions on lines 15499 and 15500 of Schedule 3.

You may have held a mortgage on a property but had to repossess the property later because you were not paid all or a part of the amount owed under the mortgage. In this case, you may have to report a capital gain or loss.

The following rules also apply when property is repossessed under a conditional sales agreement.

If, as a mortgagee (a person who lends money under a mortgage), you repossess a property because the mortgagor failed to pay you the money owed under the mortgage, you are considered to have purchased the property. At the time of repossession, you do not have a capital gain or loss. Any gain or loss will be postponed until you sell the property.

If you are the mortgagor and your property is repossessed because you did not pay the money owed under the mortgage, you are considered to have sold the property. Depending on the amount you owed at the time of repossession, you may have a capital gain, a capital loss, or, in the case of depreciable property, a terminal loss. However, if the property is personal-use property, you cannot deduct the loss.

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