REASONS
FOR JUDGMENT
Paris J.
[1]
Mr. Chitalia is appealing the inclusion of $5529
in his income as an amount received from his Registered Retirement Savings Plan
(“RRSP”) in his
2012 taxation year. Mr. Chitalia withdrew the amount from his RRSP under the
Home Buyers’ Plan (“HBP”) in order to purchase a condominium unit for himself
and his family in Mississauga, Ontario.
[2]
Where certain conditions set out in section
146.01 of the Income Tax Act (the “Act”)
are met, a withdrawal made under the HBP will qualify as an “excluded
withdrawal” and is not required to be included in an individual’s income, as
would otherwise be the case pursuant to subsection 146(8) of the Act.
[3]
The Minister of National Revenue reassessed Mr.
Chitalia to include the RRSP withdrawal in his income on the basis that the
withdrawal was not an “excluded withdrawal” pursuant to subsection 146.01 of
the Act.
[4]
An “excluded withdrawal” is defined in the Act
to include an “eligible amount”, which is made
up of either a “regular eligible amount” or a “supplemental eligible amount” (which
is not relevant here). An RRSP withdrawal will qualify as a “regular eligible
amount” if the individual did not acquire the qualifying home more than 30 days
before the date of the withdrawal.
[5]
Finally for the purposes of the HBP, paragraph
146.01(2)(b) deems an individual to have acquired a condominium unit on
the day the individual becomes entitled to immediate vacant possession of the
unit.
[6]
The effect of these provisions is that, where an
individual purchases a condominium unit, an RRSP withdrawal under the HBP will
only be excluded from the individual’s income if the withdrawal is made no more
than 30 days after the individual became entitled to immediate vacant
possession of the unit.
[7]
The relevant provisions of the Act read
as follows:
146(8) Benefits
[and withdrawals] taxable – There shall be included in computing a taxpayer’s income for a
taxation year the total of all amounts received by the taxpayer in the year as
benefits out of or under registered retirement savings plans, other than
excluded withdrawals (as defined in subsection 146.01(1) or 146.02(1)) of
the taxpayer and amounts that are included under paragraph (12)(b) in computing
the taxpayer’s income.
146.01(1)
Definitions – In
this section,
“eligible amount”
of an individual is a regular eligible amount or supplemental eligible amount
of the individual;
“excluded
withdrawal” of an individual means
(a) an
eligible amount received by the individual,
“regular eligible
amount” of an individual means an amount received at a particular time by
the individual as a benefit out of or under a registered retirement savings
plan if
…
(d)
neither the individual nor the individual’s spouse or common-law partner
acquired the qualifying home more than 30 days before the particular time,
…
(2) Special rules – For the purposes of this section,
…
(b) where an
individual agrees to acquire a condominium unit, the individual shall be deemed
to have acquired it on the day the individual is entitled to immediate vacant
possession of it;
[8]
The facts of this case are straightforward.
[9]
On September 27, 2011 Mr. Chitalia and his
spouse entered into an agreement to purchase a condominium unit that was to be
constructed. The purchase had an interim closing date of November 3, 2011 and a
final closing date of January 20, 2012.
[10]
Mr. Chitalia and his spouse became entitled to
vacant possession and occupancy of the condominium unit on the interim closing
date and moved in immediately after that date.
[11]
The final closing of the sale took place as
scheduled on January 20, 2012.
[12]
Mr. Chitalia withdrew $5,529 from his RRSP at
Questrade on January 12, 2012 under the HBP.
[13]
In order to make the withdrawal, he filled out
the form provided by the Canada Revenue Agency entitled “Home Buyers’ Plan -
Request to Withdraw Funds from an RRSP.” The instructions at the top of the
form include the statement: “Answer the questions in Part A of Area 1 to
determine if you are eligible to make a withdrawal from your RRSP under the
HBP.”
[14]
Question 6 in Part A of Area 1 on the form
reads:
Has the person who is buying or building the
qualifying home or his or her spouse or common law partner owned the home more
than 30 days before receiving this withdrawal?
[15]
The form indicates that if the applicant answers
“No” to Question 6, he or she is eligible to make the withdrawal under the HBP.
Mr. Chitalia answered no to this question because the purchase of the unit was
not scheduled to complete until January 20, 2012.
[16]
However, since Mr. Chitalia and his spouse
became entitled to immediate vacant possession of the condominium unit on
November 3, 2011, they were deemed by paragraph 146.01(2)(b) of the Act
to have acquired the condominium unit on that date, which was more than 30 days
before the RRSP withdrawal was made.
[17]
Clearly, Question 6 on the withdrawal form is
misleading in that it fails to refer to the deemed acquisition date for
condominium units that is provided for in paragraph 146.01(2)(b). In
fact, there is no reference to a deemed acquisition date anywhere on that form.
A taxpayer reading that form would have no way of knowing about the special
rule relating to the deemed acquisition date and that it would differ from the
date of ownership, as that term is commonly understood.
[18]
Mr. Chitalia concedes that the RRSP withdrawal
does not qualify as an “excluded withdrawal” but argues that he should not be
required to include it in his income because he was misled by the withdrawal
form as to when he could withdraw the funds from his RRSP in order for it to
qualify as an “excluded withdrawal”.
[19]
He points out that he reviewed the withdrawal
form before making the withdrawal and relied on the information provided in the
form concerning his eligibility to make a tax-free withdrawal from his RRSP.
Based on his reading of that form, he waited to make the withdrawal to ensure
that it fell within 30 days of the completion date of the purchase of the
condominium unit. He considered that he did not own the condominium until the
closing date.
[20]
Unfortunately for Mr. Chitalia, the Court cannot
give effect to a form drafted by the Canada Revenue Agency (the “CRA”) if that form conflicts with the provisions of
the Act. The wording of the Act must prevail.
[21]
In a somewhat analogous situation, the Federal
Court of Appeal has held in the case of Klassen v. The Queen, 2007 FCA
339, that no relief could be granted by the Court on the basis that the
taxpayer had received erroneous advice from the CRA. At paragraph 27 of that
decision, the Court said:
Finally,
I see no basis in the appellant’s contention that the assessment should be varied
based on an officially induced error. It is trite law that the relief granted
by the courts in an appeal against a reassessment under ITA must be based on
the law. If in fact the appellant was misled through negligence, some other
remedy may be available. However, no relief can be granted on this basis in
the context of a tax appeal.
[22]
The wording of the relevant portions of subsections
146.01(1) and (2) to which I have referred are clear and unambiguous with the
result that the RRSP withdrawal made by Mr. Chitalia is not an “excluded
withdrawal” under the Act and must be included in his income in 2012.
[23]
The appeal must,
therefore, be dismissed.
[24]
Given the
inequity of this result, Mr. Chitalia may wish to consider applying for a
remission of tax pursuant to subsection 23(2) of the Financial
Administration Act, R.S.C. 1985, c. F-11. The CRA should also revise the wording
of the HPB withdrawal form to alert new condominium unit buyers to the deemed
acquisition date as provided for in paragraph 146.01(2)(b).
[25]
Costs are awarded to Mr.
Chitalia.
Signed at Ottawa,
Canada this 16th day of November 2017.
“B.Paris”
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