Fifteenth article in this silo, and the first in it written against a statute rather than against guidance. That turned out to matter more than we expected.
Key Takeaway
Section 130.1(6)(d) caps a holder at more than 25 percent of the issued shares of any class[1]. Our own arithmetic: a holder at 24 percent of a class breaches if 4 percent of that class redeems, having done nothing. Separately, paragraphs (h) and (i) set a leverage cap of 3 times or 5 times equity depending on a two-thirds asset test that is distinct from the 50 percent qualification test, and which we found in no summary.
The Verdict, Stated First
Five claims, in descending order of confidence.
One. Four widely repeated descriptions of these rules are wrong, and we can show it against the text.
Two. On our own arithmetic the concentration cap can be breached passively, by a shareholder who took no action.
Three. The statute contains a leverage test with a two-thirds threshold that is separate from the 50 percent qualification test, and which the summaries we obtained do not mention.
Four. On our own arithmetic a MIC can satisfy a twenty-shareholder test with five actual shareholders, because of a counting rule in subsection (7).
Five. And every one of these is an at-all-times test, so a failure can be discovered after the distribution it invalidates.
The first is the reason we went to the statute, ours. We had four summaries and three of them disagreed with each other, which is a signal to stop reading summaries.
Our Grades For These Claims
Applying the scheme this publication uses throughout. This is the best-sourced article in this silo, because the primary source is the statute itself and it is free.
Grade A for every rule stated, all quoted from the consolidated Income Tax Act on the Justice Laws website, current to 21 June 2026 and last amended 18 June 2026[1].
Grade A for our own arithmetic, which follows from the quoted text.
Grade A for the four corrections, since each is a direct comparison between a published summary and the provision it summarises.
Grade C for anything about how the Canada Revenue Agency applies paragraph (6)(b), which rests on a single commentary from 2012.
Not graded, because not attempted: the securities law overlay. Raising money for a MIC engages prospectus exemptions and, in most provinces, mortgage brokerage legislation. We have not researched either.
A Note On Method
Everything here is verified to 29 August 2026.
We obtained the full text of section 130.1 of the Income Tax Act from the Justice Laws website, which states the Act is current to 21 June 2026 and was last amended on 18 June 2026[1].
We had previously collected four secondary summaries and found they disagreed with each other on three separate points. Rather than choose between them we obtained the provision, which is the only reason this article can state anything with confidence.
We did not obtain any Canada Revenue Agency interpretation bulletin, technical interpretation or advance ruling, and we did not obtain any case law. Where the application of a provision is contested rather than its text, we say so and stop.
We did not examine the registered plan rules in section 207.01 and following, which bear on holding MIC shares inside an RRSP or TFSA and which are the likely origin of a figure we correct below.
All arithmetic is ours. Every dollar figure, share class and shareholder is invented to demonstrate a structure.
This article discusses a taxation provision and is not accounting, tax, legal or investment advice. Any specific position should be confirmed against the current Act and with a tax advisor.
What The Structure Actually Does
The mechanism, from subsection (1).
In computing income for a year throughout which a corporation was a mortgage investment corporation, there may be deducted all taxable dividends, other than capital gains dividends, paid by the corporation during the year or within 90 days after the end of the year to the extent not deducted in the preceding year, plus one half of all capital gains dividends paid in a window beginning 91 days after the start of the year and ending 90 days after its end. The corporation may make no deduction under section 112 for taxable dividends received from other corporations[1].
Four observations, ours.
The deduction is the whole structure. A MIC that distributes its income deducts what it distributes and is left with nothing to tax.
Nothing in the section requires a distribution of 100 percent. The requirement is economic rather than statutory: whatever is not distributed is taxed.
The capital gains dividend is treated differently, at one half, which mirrors the capital gains inclusion rate and preserves the character of the gain in shareholders' hands.
And subsection (5) supplies a point that surprises people, ours. A mortgage investment corporation is deemed to be a public corporation[1], whatever its actual ownership.
Deemed To Be Interest
The shareholder side, and the reason these vehicles appear in registered accounts.
Subsection (2) provides that any amount received from a mortgage investment corporation by a shareholder as a taxable dividend, other than a capital gains dividend, shall be deemed to have been received by the shareholder as interest payable on a bond issued by the corporation after 1971[1]. Subsection (3) applies that where the dividend was paid during a year throughout which the payer was a MIC, or within 90 days after[1].
Four observations, ours.
The distribution is a dividend that is taxed as interest. It is not an eligible dividend and carries no dividend tax credit.
Which makes the vehicle unattractive in a taxable account relative to an equivalent-yield eligible dividend, and attractive inside a registered account where the character does not matter.
That is the design working as intended. The structure moves interest income from mortgages to investors without a layer of corporate tax, which is what a conduit is for.
And the 90 day tail in subsection (3) is worth noticing, because it means status must hold through the year and the dividend can follow shortly after.
The Nine Conditions
Subsection (6) sets out what must be true throughout the year. Paraphrased closely, and the exact words matter enough that we quote several below.
(a) it was a Canadian corporation. (b) its only undertaking was the investing of funds of the corporation and it did not manage or develop any real or immovable property. (c) none of its property consisted of debts secured on real property outside Canada, debts owing by non-residents except where secured on Canadian real property, shares of non-resident corporations, or foreign real property or leasehold interests in it. (d) there were 20 or more shareholders and no person would have been a specified shareholder under a modified definition. (e) preferred shareholders had a right to participate pari passu with common shareholders in further dividends after certain payments. (f) qualifying residential mortgage debts, deposits at CDIC-insured institutions or credit unions, plus money, were at least 50 percent of the cost amount of all property. (g) real property, excluding property acquired on foreclosure or default, did not exceed 25 percent of the cost amount of all property. (h) liabilities did not exceed 3 times equity where the (f) assets were under two thirds at any time in the year. (i) liabilities did not exceed 5 times equity where (h) does not apply[1].
Four observations, ours.
All nine must hold throughout the year, which is a continuous test rather than a year-end snapshot.
Failure of any one loses the status, and the section provides no partial or proportionate outcome.
Two of the nine are leverage tests, which is a larger share than any summary we read suggested.
And the drafting is worth a note in itself, ours. Paragraphs (h) and (i) are a pair that between them always produce an answer, so a MIC always has a leverage cap; the only question is which.
Four Things The Summaries Get Wrong
We collected four secondary descriptions before obtaining the statute. Three of them contain errors we can demonstrate, and the fourth contains a figure with no basis in the section at all.
Four observations, ours.
This is not a criticism of the authors, several of whom are specialist practitioners writing accurately about matters we have not checked.
It is an argument about method. Where a rule is a bright line and the text is free, the text is the source, and a summary is a finding aid.
The errors are also not equally consequential. One would change who qualifies; another would only change a count by one.
And they are set out below individually, ours, because a correction without the working is just another assertion.
It Is Per Class, Not Total Capital
The most consequential of the four.
Paragraph (6)(d) requires that no person would have been a specified shareholder if the definition in subsection 248(1) were read as "a taxpayer who owns, directly or indirectly, at that time, more than 25% of the issued shares of any class of the capital stock of the corporation"[1].
One law firm summary states the test as applying to any class[2], and a second describes it as assessed on a per-class basis[5]. But an encyclopedia entry states that no shareholder may hold more than 25 percent of the MIC's total share capital[4].
Four observations, ours.
The statute says any class. The total capital reading is wrong.
The difference is not academic. A holder can sit at 30 percent of a small class and 15 percent of total capital, which passes one test and fails the other, and the one it fails is the real one.
It also runs the other way. A holder at 30 percent of total capital spread across several classes might hold under 25 percent of each, and would qualify.
And it changes what a MIC should monitor, ours. The register has to be watched class by class, and a MIC with many small classes has many more places to fail.
Twenty Or More, Not More Than Twenty
The smallest of the four, and still a bright line.
Paragraph (6)(d) opens: "there were 20 or more shareholders of the corporation"[1]. A 2012 commentary describes the requirement as greater than 20 shareholders[3].
Four observations, ours.
Twenty is sufficient. Twenty-one is not required.
The difference matters only to a MIC sitting at exactly twenty, which is precisely the MIC most at risk and therefore the one most likely to be reading closely.
A practitioner following the stricter reading would be safe but wrong, which is the harmless direction to err.
And it illustrates the general point, ours. Two published descriptions of a five-word phrase differ, which is what free primary sources are for.
The First Year Is Not Waived
Third correction, and the summaries diverge in both directions from what the section says.
Subsection (8) provides that a corporation incorporated after 1971 "shall be deemed to have complied with paragraph 130.1(6)(d) throughout the first taxation year of the corporation in which it carried on business if it complied with that paragraph on the last day of that taxation year"[1].
One summary describes the requirements as somewhat relaxed in the first year[2]; another says they are waived[5].
Four observations, ours.
Nothing is waived. The relief is a deeming rule that requires actual compliance on the last day.
And the relief is narrower than either description: it applies to paragraph (6)(d) only, being the shareholder count and concentration test.
So the asset tests in (f) and (g), the leverage tests in (h) and (i), the undertaking test in (b) and the foreign property test in (c) apply in full from day one, which neither summary conveys.
And that is the practically important half, ours. A new MIC has room on its shareholder register and none at all on its balance sheet.
The Ten Percent Rule That Is Not There
Fourth, and this one we correct by absence.
An encyclopedia entry states, immediately after the 25 percent rule, that shareholders whose MIC holdings are held in registered accounts are limited to 10 percent due to regulations restricting ownership in those accounts[4].
Four observations, ours.
There is no 10 percent figure anywhere in section 130.1. We have the full text and it does not appear.
The claim also carries its own qualifier, attributing the limit to regulations restricting ownership in registered accounts rather than to section 130.1, so it may be describing a real rule in the wrong place.
The likely origin, ours and offered only as a lead, is the prohibited investment and significant interest rules that govern registered plans, which sit elsewhere in the Act and which we did not examine.
And the correct statement is the careful one. Section 130.1 imposes no 10 percent limit, and anyone holding MIC shares in a registered account should ask a different question of a different provision.
The Breach Nobody Caused
Our own arithmetic, and the finding this article is named for.
A percentage is a ratio. The concentration cap in paragraph (6)(d) is measured against the issued shares of a class, so anything that reduces the class raises everybody else's percentage.
Take an invented Class A of $10,000,000 with a largest holder at 24 percent, being $2,400,000. Now redeem shares from that class and hold the largest holder completely still.
With no redemption, the holder is at 24.0 percent. After 4 percent of the class redeems: 25.0 percent. After 10 percent: 26.7 percent, a breach. After 20 percent: 30.0 percent. After 30 percent: 34.3 percent.
Four observations.
A holder at 24 percent breaches once more than 4 percent of the class has gone. That is one mid-sized investor exercising a right they were sold.
The holder took no action, received no notice and had no vote in the transaction that put them offside.
Nor is there anything in the section that looks to fault or intent. Paragraph (6)(d) is a state of the world, tested throughout the year, and it is either true or it is not.
And the general form of the risk is worth stating plainly, ours. Every concentration cap measured as a percentage of a shrinking base is a trap for the largest remaining holder, and a redeemable share class is a shrinking base by design.
Why Small Classes Are The Exposure
The consequence of the per-class reading. Ours.
Four observations.
The denominator is the class, not the corporation, so a small class is a small denominator and a small denominator moves fast.
A MIC with one large class and several small ones has its concentration risk concentrated in exactly the places nobody watches, because the small classes are immaterial to the financial statements.
Multiple share classes are common in these vehicles for good reasons, including differentiated fee structures, redemption terms and distribution rates.
And each one is an independent test, ours. A MIC with six classes has six concentration tests running continuously, and failing any one of them fails the whole corporation.
One Trust, Four Shareholders
A counting rule with an asymmetry we did not expect.
Subsection (7) provides that in paragraph (6)(d), a trust governed by a registered pension plan or deferred profit sharing plan by which shares are held shall be counted as four shareholders for the purpose of determining the number of shareholders, but as one shareholder for the purpose of determining whether any person is a specified shareholder[1].
Four observations, ours.
The same trust is four shareholders for one test in the paragraph and one shareholder for the other test in the same paragraph.
The asymmetry runs in the taxpayer's favour on both counts. Four helps satisfy the minimum, and one avoids aggregating several plans into a single large holder.
The evident purpose is to recognise that a pension trust represents many beneficiaries rather than one investor, which is a sensible policy and is implemented by a blunt multiplier.
And blunt multipliers have edges, ours, which is the next section.
The Five-Shareholder MIC
Our own arithmetic on subsection (7), and a result we double-checked because it looked wrong.
Consider a MIC whose shares of a class are held entirely by registered pension plan trusts, in equal amounts.
With three trusts: counted as 12 shareholders, each holding 33.3 percent. Count fails. With four: counted as 16, each at 25.0 percent. Count fails. With five: counted as 20 shareholders, each holding 20.0 percent. Both tests pass. With six: counted as 24, each at 16.7 percent. With eight: counted as 32, each at 12.5 percent.
Four observations.
Five actual shareholders satisfy a twenty-shareholder test, because five multiplied by four is twenty and each holds 20 percent, under the 25 percent cap.
The two tests in paragraph (6)(d) bind in opposite directions, which is why the answer is a narrow window rather than a floor: fewer than five fails the count, and the count is only satisfied at a holding level that also happens to clear the concentration cap.
We state this as a reading of the text and not as a recommendation, ours. Whether the Canada Revenue Agency would accept a five-holder MIC as satisfying a provision plainly designed to require breadth is a question we have not researched and would not answer from the text alone.
And it sharpens the passive breach problem considerably, ours. In a five-trust MIC every holder sits at 20 percent, and the redemption of any one of them puts the remaining four at 25 percent, which is at the line, while simultaneously dropping the count to 16.
Two Thresholds On The Same Assets
The finding we found in the statute and in none of the summaries.
Paragraph (6)(f) requires that qualifying residential mortgage debts, plus deposits at CDIC-insured institutions or credit unions, plus money, be at least 50 percent of the cost amount of all property[1].
Paragraph (6)(h) then provides that liabilities did not exceed 3 times the excess of the cost amount of all property over liabilities where at any time in the year that same category of assets was less than two thirds of the cost amount of all its property. Paragraph (6)(i) provides that liabilities did not exceed 5 times that excess where (h) does not apply[1].
Four observations, ours.
The same asset category carries two different thresholds doing two different jobs. Fifty percent decides whether the corporation qualifies at all. Two thirds decides how much it may borrow.
A MIC sitting between them, at say 60 percent, is a valid MIC restricted to three times leverage, and nothing in the qualification headline tells it so.
None of the four summaries we obtained mentions the two-thirds test or the leverage caps at all, and we would not have known to look for them.
And that is the argument for the primary source in one line, ours. A summary can only omit; a statute cannot.
One Day Below Two Thirds
The three words in paragraph (h) that decide the year. Ours.
Paragraph (6)(h) applies "where at any time in the year" the qualifying assets plus money were less than two thirds of the cost amount of all property[1].
Four observations.
One moment below two thirds engages the three times cap for the entire year, on the plain words.
There is no averaging, no grace period and no cure mechanism in the paragraph, which distinguishes it from the many tax provisions that do provide one.
Which makes an ordinary event dangerous. A large mortgage funding that briefly shifts the mix, or a foreclosure that moves an asset out of the qualifying category, can engage it.
And the interaction with paragraph (g) deserves a note, ours. Real property acquired on foreclosure is excluded from the 25 percent real property cap[1], which protects a lender who has to take a property back, but we can see no corresponding relief in the two-thirds test.
What The Threshold Is Worth
Our own arithmetic on an invented MIC with $20,000,000 of equity.
At qualifying assets of 50, 60 or 66 percent, the cap is 3 times: maximum liabilities $60,000,000 and maximum total assets $80,000,000. At 67 percent or above, the cap is 5 times: maximum liabilities $100,000,000 and maximum total assets $120,000,000.
At a hypothetical 6 percent gross spread on assets, the three times position produces $4,800,000, or 24.0 percent on equity. The five times position produces $7,200,000, or 36.0 percent on equity.
Four observations.
Crossing two thirds is worth $40,000,000 of borrowing capacity on the same equity.
In return terms it is 12 points of gross spread on equity on our illustrative assumptions, which is a very large consequence for one point of asset mix.
Our 6 percent spread is invented and is a gross figure, taking no account of the cost of the borrowing itself, of credit losses or of expenses; the comparison is between two capital structures, not a forecast of either.
And it points at a real management question, ours. A MIC operating near two thirds is choosing between asset mix and leverage without necessarily knowing it, and the choice is made continuously rather than at a board meeting.
The Only Undertaking
Paragraph (6)(b), which is where the commentary we obtained locates the practical risk.
The paragraph requires that its only undertaking was the investing of funds of the corporation and it did not manage or develop any real or immovable property[1].
A 2012 commentary observes that management and development activities could jeopardise MIC status under subsection 130.1(6), that the Canada Revenue Agency appears to have adopted an unfavourable interpretation of the rules, and that a MIC at risk may be able to rely on certain deeming rules to remain in compliance with paragraph 130.1(6)(b) in subsequent years[3].
A single commentary from 2012, and we obtained no ruling, interpretation or case to test it against, flagged.
Four observations, ours.
This is the one place in the section where the text alone is not enough, because managing and developing are activities rather than measurements.
The risk is structural rather than accidental. A mortgage lender that forecloses acquires property it may then need to protect, insure, maintain and sell, and the line between protecting an asset and managing it is not drawn in the paragraph.
The section does contemplate foreclosure elsewhere, since paragraph (g) expressly excludes foreclosed property from the real property cap[1], which suggests the drafters expected MICs to hold it.
And that is where we stop, ours. Whether a given post-foreclosure activity crosses into managing or developing is a question for a tax advisor on facts, and nothing in this article should be read as an answer to it.
The Preferred Share Constraint
Paragraph (6)(e), which quietly limits capital structure design.
Any holders of preferred shares must have a right, after payment to them of their preferred dividends, and payment of dividends in a like amount per share to the holders of the common shares, to participate pari passu with the holders of the common shares in any further payment of dividends[1].
Four observations, ours.
A MIC cannot issue straight non-participating preferred shares in the ordinary sense, because the participation right is mandatory.
The sequence is specific: preferred dividends first, then a like amount per share to common, and only then equal participation.
Which constrains the common structure of giving one class a fixed return and another the residual, since the fixed class must be allowed back in once common has caught up per share.
And it is a drafting requirement rather than an operational one, ours. It is satisfied or failed in the articles, which means it is cheap to get right at incorporation and expensive to discover later.
A Definition Frozen In 1999
A detail in paragraph (6)(f) that we did not expect to find.
The qualifying mortgage assets are debts secured on houses (as defined in section 2 of the National Housing Act) or on property included within a housing project (as defined in that section as it read on June 16, 1999)[1].
Four observations, ours.
One of the two definitions is frozen at a specific historical date and the other is not.
So determining whether an asset qualifies may require the National Housing Act as it read on 16 June 1999, which is not the version on the shelf.
This is ordinary legislative technique rather than an oversight, freezing a cross-reference so that later amendments to another statute cannot silently change a tax result.
And it is a practical trap for anyone testing the 50 percent condition, ours. The current definition of housing project is not the operative one, and we have not obtained the 1999 text.
The Ninety Day Window
Timing, which ties the structure together. Ours.
Four observations.
The deduction in subsection (1) covers dividends paid during the year or within 90 days after it[1], so the corporation has a quarter after year end to clear its income.
Subsection (3) extends the interest characterisation to dividends paid during a year throughout which the payer was a MIC or within 90 days thereafter[1], aligning the two.
That window is useful and is not a cure for a failed condition, since the conditions in subsection (6) must have held throughout the year that has already ended.
And this is where the whole article converges, ours. A MIC can distribute its income in the 90 days after year end and discover afterwards that a condition failed nine months earlier, at which point the income is taxable in the corporation and the cash is with the shareholders.
If You Run A MIC
Practical, and not accounting, tax, legal or investment advice. Ours.
Four points.
Monitor concentration class by class, continuously, and model redemptions before approving them. A holder at 24 percent of a class breaches when 4 percent of that class leaves.
Know which leverage cap you are under, and watch the two-thirds line rather than only the 50 percent one. On the words, a single day below two thirds engages the three times cap for the whole year.
Check the articles against paragraph (6)(e). The preferred participation right is a drafting matter that is cheap to fix at incorporation.
And treat every test as continuous. There is no year-end snapshot in subsection (6) and no cure mechanism in it either.
If You Advise One
For our own profession. Ours.
Four points.
Read the section rather than a summary of it. Of four summaries we collected, three contained demonstrable errors and none mentioned the leverage tests.
Reconstruct the qualifying asset ratio at more than one date in the year, because paragraph (h) turns on the lowest point rather than the average or the closing figure.
Build the concentration test into the redemption approval process, since the corporation controls redemptions and does not control who holds what afterwards.
And raise paragraph (6)(b) early with any MIC that forecloses, because that is the condition whose application is contested rather than its text.
What To Do
Get the statute. Section 130.1 is free on the Justice Laws website and three of four summaries we read were wrong about it.
Test concentration per class, not against total share capital.
Model the redemption before approving it, because the remaining largest holder's percentage rises whether or not they act.
Watch two thirds as well as fifty percent. One is the qualification test and the other decides whether leverage is capped at three times or five.
Treat the two-thirds test as a minimum-across-the-year test, since paragraph (h) says at any time in the year.
Count registered pension and deferred profit sharing trusts as four for the minimum and one for concentration, per subsection (7).
Do not rely on a first-year waiver. Subsection (8) is a deeming rule requiring actual compliance on the last day, and it covers paragraph (6)(d) only.
And ignore the ten percent registered account figure as a section 130.1 rule, because it is not in the section; ask about the registered plan provisions instead.
The Limits Of This Analysis
Several caveats matter. This article discusses a taxation provision and is not accounting, tax, legal or investment advice; any specific position should be confirmed against the current Act and with a tax advisor. We obtained the text of section 130.1 and nothing else from the Act. The section operates by reference to other provisions, including the definition of specified shareholder in subsection 248(1), paragraph 251(2)(a), section 112, the definition of taxed capital gains in paragraph 130(3)(b) and subsections 131(1.1) to (1.4), and we did not obtain any of them; where the section modifies a definition we have used the modified wording it supplies. We obtained no Canada Revenue Agency interpretation bulletin, technical interpretation, advance ruling or case law, so everything here is the text as written rather than the text as applied, and those differ in at least one place we identify. Our reading that five registered pension plan trusts can satisfy the twenty shareholder test is a reading of subsections (6)(d) and (7) together, it is our own, and we say expressly that we do not know whether it would be accepted; it should not be treated as a plan. We did not examine the registered plan rules in section 207.01 and following, which we identify as the likely source of a figure we correct, and our suggestion as to its origin is a lead rather than a finding. We did not obtain the National Housing Act, and one of the definitions paragraph (6)(f) relies on is frozen as it read on 16 June 1999, so we cannot say what qualifies. We have not researched the securities law or mortgage brokerage regulation that applies to raising money for and administering a MIC, which in most provinces is substantial and is a separate body of obligation entirely. All arithmetic is ours: the share classes, the equity, the asset ratios and the 6 percent gross spread are invented to demonstrate a structure, and the spread in particular takes no account of borrowing cost, credit losses or expenses. And the Act changes: the version we obtained is stated to be current to 21 June 2026 and to have been last amended on 18 June 2026.
Frequently Asked Questions
Is the 25 percent cap on total shares or per class?
How can a shareholder breach the cap without doing anything?
Is it 20 shareholders or 21?
What is the leverage limit?
So what does 50 percent do?
Are the first-year rules waived?
Can a pension trust help meet the 20 shareholder test?
References
- Canada, Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.), section 130.1, obtained in full from the Justice Laws Website maintained by the Department of Justice. The page states that the Act is current to 2026-06-21 and was last amended on 2026-06-18. Subsection (1) provides the deduction for taxable dividends paid during the year or within 90 days after its end, and one half of capital gains dividends paid in a defined window, and denies a section 112 deduction. Subsection (2) deems a taxable dividend other than a capital gains dividend received from a MIC to have been received as interest payable on a bond issued after 1971. Subsection (3) extends that to dividends paid within 90 days after a qualifying year. Subsection (5) deems a MIC to be a public corporation. Subsection (6) sets the nine conditions in paragraphs (a) to (i), including the Canadian corporation requirement, the only-undertaking and no-management-or-development requirement, the foreign property prohibition, the 20-or-more shareholder requirement and the modified specified shareholder definition capping a holder at more than 25 percent of the issued shares of any class, the preferred share pari passu participation requirement, the 50 percent qualifying asset test referencing houses as defined in section 2 of the National Housing Act and housing project as defined in that section as it read on June 16 1999, the 25 percent real property cap excluding property acquired by foreclosure or default, and the 3 times and 5 times leverage caps turning on whether the qualifying assets plus money were less than two thirds of the cost amount of all property at any time in the year. Subsection (7) counts a registered pension plan or deferred profit sharing plan trust as four shareholders for the count and one for the specified shareholder test. Subsection (8) deems compliance with paragraph (6)(d) throughout the first taxation year of carrying on business if complied with on the last day. Subsection (9) defines liabilities. Note: the consolidated statute itself, obtained directly from the Government of Canada. This is the primary source for every rule stated in this article and the basis of all four corrections in it. laws-lois.justice.gc.ca
- National law firm's published summary of mortgage investment corporation requirements, describing the special treatment under section 130.1, the taxation of income effectively at the shareholder level through the deduction of taxable dividends paid, the requirement for 20 or more shareholders, the restriction preventing any shareholder from owning in excess of 25 percent of the issued shares of any class of the capital stock, the requirement that more than 50 percent of assets computed on cost amount be in Canadian residential mortgages or in deposits at CDIC-insured institutions or credit unions, the ability to invest up to 25 percent of assets directly in real estate without developing land or engaging in construction, the exclusion of real estate acquired through mortgage default from that ceiling, the requirement that all investments be in Canada, the eligibility of MIC shares for RRSP, RRIF and TFSA, the requirement for audited annual financial statements, and the description of first-year requirements as somewhat relaxed and met to the extent they are met at the end of the first taxation year. Note: a law firm summary, informed but NOT authoritative, flagged. CORRECT on the per-class reading of the 25 percent cap and on the 20-or-more count. Its characterisation of the first-year rule as somewhat relaxed is imprecise against subsection (8), and it does not mention the leverage tests in paragraphs (h) and (i). millerthomson.com
- Legal commentary published in 2012 on mortgage investment corporations, describing MIC status as special non-taxable treatment for a conduit flowing interest income earned on residential mortgage loans to shareholders under section 130.1(6); stating the policy rationale as attracting capital to the Canadian residential mortgage market; observing that management and development activities could jeopardise MIC status pursuant to subsection 130.1(6) with potentially serious consequences for the corporation and its investors; stating that the Canada Revenue Agency appears to have adopted an unfavourable interpretation of the rules and that recent tax law changes may subject some MICs to greater scrutiny; and suggesting that a MIC at risk of being involved in management, administration and development activities may be able to rely on certain deeming rules in the Act to remain in compliance with paragraph 130.1(6)(b) in subsequent taxation years. Note: a legal commentary from 2012, informed but NOT authoritative and now more than a decade old, flagged. INCORRECT in describing the requirement as greater than 20 shareholders; the statute says 20 or more. Cited here only for its observation about paragraph (6)(b), which is the one area where we could not resolve the question from the text, and we obtained no ruling or case to test that observation against. lexology.com
- Encyclopedia entry on mortgage investment corporations, citing the Income Tax Act and listing as salient rules that a MIC must have at least 20 shareholders; that a MIC is generally widely held and no shareholder may hold more than 25 percent of the MIC's total share capital; that shareholders whose MIC holdings are held in registered accounts including RRSP and TFSA are limited to 10 percent due to regulations restricting ownership in those capital accounts; that at least 50 percent of a MIC's assets must be residential mortgages or cash and insured deposits at Canada Deposit Insurance Corporation member institutions; and that a MIC may invest up to 25 percent of its assets directly in real estate but may not develop land or engage in construction. Note: an open encyclopedia entry, NOT a source this publication relies on, cited here specifically as the origin of two errors this article corrects. INCORRECT in stating the 25 percent cap applies to total share capital; the statute applies it to any class. The 10 percent registered account figure DOES NOT APPEAR ANYWHERE IN SECTION 130.1; the entry attributes it to regulations governing registered accounts rather than to this section, and we did not examine those provisions. en.wikipedia.org
- Practitioner commentary on mortgage investment corporation qualification, describing the requirement for at least 20 shareholders, the restriction preventing any shareholder from holding more than 25 percent of any class of shares assessed on a per-class basis meaning it applies separately to each class, and describing the shareholder requirements as waived during the MIC's first fiscal year. Note: practitioner commentary, informed but NOT authoritative, flagged. CORRECT and unusually explicit on the per-class assessment. INCORRECT in describing the first-year rule as a waiver; subsection (8) is a deeming provision that requires actual compliance on the last day of the year and applies only to paragraph (6)(d).
This article discusses a taxation provision and is not accounting, tax, legal or investment advice. It is written from the text of section 130.1 as consolidated to 21 June 2026. No Canada Revenue Agency interpretation, ruling or case law was obtained, and no provision other than section 130.1 was obtained. The securities law and mortgage brokerage regulation applying to these vehicles has not been researched. All arithmetic is the authors' own and every figure is invented.