Principal Issues: Can a homeowner claim his/her proportionate share of the costs incurred, for building a fence along a shared fence line?
Position: Yes, but only to the extent of costs incurred by the homeowner.
Reasons: Building of a fence on land that forms part of an eligible dwelling is a qualifying renovation. The outlay or expense must be made or incurred by the individual or a qualifying relation in respect of the individual.
XXXXXXXXXX 2009-034894
W. King
January 19, 2010
Dear XXXXXXXXXX :
This is in reply to your correspondence dated November 18, 2009, wherein you asked if the cost of the materials you incurred, for building a fence along a shared fence line, are permitted to be transferred to the owner of an adjoining property for purposes of claiming the new home renovation tax credit (HRTC).
The legislation regarding the new HRTC has been enacted and is contained in section 118.04 of the Income Tax Act. The HRTC provides individuals with a temporary 15% non-refundable income tax credit on eligible home renovation expenditures for services received or goods acquired, after January 27, 2009, and before February 1, 2010. However, expenditures for services received or goods acquired under agreements entered into before January 28, 2009, do not qualify for the HRTC. Taxpayers can claim this credit for the 2009 tax year on eligible expenditures exceeding $1,000, but not more than $10,000, which will result in a non-refundable tax credit of up to $1,350.
Under section 118.04, expenditures qualify for the HRTC if they are directly attributable to a renovation or an alteration of an eligible dwelling, including land that forms part of the eligible dwelling, and if the renovation or alteration is of an enduring nature and is integral to the eligible dwelling. Such expenditures include the cost of labour and professional services, building materials, fixtures, equipment rentals, and permits.
An eligible dwelling is a housing unit located in Canada that is owned by the individual at the time of the renovation, and ordinarily inhabited by the individual, his or her current or former spouse or current or former common-law partner, or his or her children at any time after January 27, 2009, and before February 1, 2010. Therefore, any housing unit that an individual owns and uses personally, including a home and a cottage, qualifies for the HRTC.
Provided the above conditions are met, the owners of adjoining properties are permitted to claim their respective expenditures incurred or made for the cost of the materials used in the construction or reconstruction of a fence situated on land forming part of their eligible dwellings. An individual will not be permitted to claim expenditures made or incurred by another person in respect of the individual's eligible dwelling unless the other person is a qualifying relation in respect of the individual. A qualifying relation in respect of an individual is the individual's spouse or common-law partner and their children who will be under 18 years of age at the end of 2009, except if the child, at any time during the eligible period [after January 27, 2009 and before February 1, 2010], has a child, a spouse or common-law partner.
Documentation in support of a homeowner's qualifying expenditures (with the exception of the new Schedule 12) is not required to be submitted with the 2009 T1 Income Tax and Benefit Return; however, the supporting documentation must be available if requested by the Canada Revenue Agency for verification purposes. Supporting documentation should contain a description of the materials; the date the materials were purchased and delivered; and the invoice or receipt. If only one invoice or receipt exists, the documentation should clearly identify the amount paid by each homeowner.
We trust that the information provided is helpful.
Yours truly,
Nerill Thomas-Wilkinson, CA
Acting Manager
for Acting Director
Ontario Corporate Tax Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
