16 July 1998 GST/HST Interpretation HQR0000861 - GST/HST New Housing Rebates

                                                                        GST/HST Rulings and Interpretations
  Directorate
Place Vanier, Tower C, 10th Floor
25 McArthur Road
Vanier, Ontario
XXXXX                                                                                 K1A 0L5

Dear XXXXX

We are writing in response to an E-mail from XXXXX of your office dated September 11, 1997 respecting multiple GST/HST new housing rebate applications for side by side strata lots with no party wall separating them.

Facts

Our understanding of the facts is based upon a letter from XXXXX of Revenue Canada's Audit Unit to XXXXX, and from a letter to XXXXX of the Revenue Canada Audit Branch from XXXXX, the GST applicant, received in April of 1997; as well as from a review of the purchaser's statement of adjustments for strata lots XXXXX and the purchase and sale agreements for the same lots.

1. In XXXXX, the husband of the applicant entered into two agreements to purchase strata lots XXXXX[.] The lots are side by side and the purchaser's intention was amalgamate them into a single residence for himself and his wife.

2. The applicant's husband died before the transactions closed.

3. The applicant did not wish to carry out the transaction but was apparently under a legal obligation to do so and the transaction closed on XXXXX[.] The applicant had no intention of living in either strata lot after her husband died, and never occupied either strata lot.

4. The strata lots were built with a party wall, and the applicant has since re-sold one of them.

5. The lots cost approximately XXXXX and XXXXX respectively.

6. The applicant has sought separate GST/HST new housing rebates in respect of each strata lot.

Interpretation Requested

We have been asked to consider whether the applicant is eligible to apply for a GST/HST new housing rebate in respect of the transactions and if so, whether she is eligible for a separate rebate in respect of the acquisition of each of the strata lots calculated individually, or whether, only one rebate is available for the strata lots together to be calculated on the total value of the two strata lots.

Interpretation Given

Based on the information provided we conclude that the if the applicant is applying for a rebate as the executrix of her husband's estate, a separate GST/HST new housing rebate application should be allowed with respect to each lot. The rebate calculation for each application should be based on the cost of the lot that was acquired by the applicant and without reference to the purchase price of the abutting strata lot.

Analysis

Eligibility for a Rebate

The copies of the agreements of purchase and sale that have been provided to us, do not indicate that the agreements are binding on the heirs of the deceased. However, for the purpose of this analysis we have assumed that the applicant was completing the agreements as the executrix of the estate of her husband.

Application of Section 254

Paragraph 254(2)(a)

Provided that all the other conditions in subsection 254(2) are met, paragraph 254(2)(a) provides for a rebate whenever the builder makes a sale of a residential condominium unit i[.]e. a strata lot, to a particular individual. The wording of the paragraph attaches a rebate to each strata lot rather than to the house as a whole.

Paragraph 254(2)(b)

At the time that the original purchaser became liable under the agreement of purchase and sale to acquire the strata lots, his intention was to use both units as a single primary residence. Thus the condition in paragraph 254(2)(b) is satisfied.

There is nothing in paragraph 254(2)(b) or in any of Revenue Canada's administrative policies that limit the size of a primary residence to a single strata lot. In this case, each strata lot was intended to form part of a primary residence and since the rebate is payable whenever a builder sells an strata lot rather than when a builder sells a primary residence, there is no legislative provision that would exclude the payment of two rebates.

Paragraph 254(2)(c)

This paragraph requires the rebate to be paid if the total consideration for a strata lot is less than $450 000. The closing words for subsection 254(2) go on to provide that where the consideration is less than $350 000, the rebate shall be equal to 36% of the GST paid. In our case each strata lot costs less than $350 000, therefore the applicant would be entitled to a rebate of 36% of the GST paid on each strata lot. In other words, the rebate calculations for each unit should be done independently and without reference to the purchase price paid for any other unit.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 954-4393.

Yours truly,

Michael Ezri
A/Rulings Officer
Real Property Unit
Financial Institutions and Real Property Division
GST/HST Rulings and Interpretations Directorate