12 September 2005 General Information Letter 57448 - General Information Letter - Municipal Designation

Please note that the following document, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence.

Dear XXXXX:

Thank you for your letter XXXXX to the GST/HST Rulings Centre XXXXX, concerning the availability of a Goods and Services Tax (GST)/Harmonized Sales Tax (HST) new housing rebate pursuant to section 256 of the Excise Tax Act (ETA). You also provided additional information XXXXX. Your request was transferred to the Real Property Unit of the Excise and GST/HST Rulings Directorate for response. I apologize for the delay in providing you with this ruling.

Statement of Facts

Based on your letter and the information subsequently provided, we understand that:

1. XXXXX began, in XXXXX, the construction of a single unit residential complex on his property located at XXXXX in the Province of XXXXX. The complex was to be XXXXX primary place of residence.

2. XXXXX passed away on XXXXX. You have indicated that, at the date of death, the house was 60% complete.

3. Prior to XXXXX death, on XXXXX, XXXXX directed, in XXXXX last will and testament, that the Executrix of XXXXX will liquidate XXXXX Registered Retirement Savings Plan and use the funds to complete the construction of the house. XXXXX also provided that the Executrix could use her discretion to exercise the power to sell the property in the settlement of XXXXX estate.

4. The Estate of XXXXX (the Estate) completed the construction of the single unit residential complex on XXXXX, for the purpose of sale. The proceeds from the sale were to be divided among the children.

5. XXXXX and XXXXX Estate paid GST/HST in respect of construction materials and services acquired to construct the single unit residential complex.

6. The completed single unit residential complex was sold to an unrelated third party on XXXXX, for $XXXXX. The Estate did not charge HST on this sale. An individual did not occupy the complex, in any capacity, prior to the transfer of ownership.

Ruling Requested

You would like to know whether the Estate or anyone else is eligible for the GST/HST new housing rebate.

Ruling Given

Based on the facts set out above, we rule that the Estate is entitled to claim a GST/HST new housing rebate pursuant to section 256 of the ETA provided that the fair market value of the single unit residential complex at the time the complex was substantially completed (i.e., on XXXXX) is less than $450,000.

This ruling is subject to the qualifications in GST/HST Memorandum 1.4, Goods and Services Tax Rulings. We are bound by this ruling provided that none of the above issues is currently under audit, objection, or appeal, that no future changes to the ETA, regulations or our interpretative policy affect its validity, and all relevant facts and transactions have been fully disclosed.

Explanation

The ETA generally allows a new housing rebate to an individual who constructs or substantially renovates a single unit residential complex for use as the primary place of residence of the individual or a relation of that individual.

There are a number of conditions that must be met in order to be entitled to claim a new housing rebate pursuant to section 256 of the ETA. Paragraph 256(2)(a) of the ETA provides, in part, that a rebate may be available where the individual constructs or engages another person to construct a single unit residential complex for use as the primary place of residence of the particular individual. In this case, XXXXX began constructing the house with the intention of living in the house as XXXXX primary place of residence and through XXXXX last will and testament instructed XXXXX Estate to complete the construction of the single unit residential complex. It is our understanding that up to the time of XXXXX death, XXXXX maintained the intention to use the complex as XXXXX primary residence. As such, the condition in paragraph 256(2)(a) is met.

Paragraph 256(2)(b) of the ETA requires that the fair market value of the single unit residential complex at the time of substantial completion be less than $450,000. The complex was sold to an unrelated third party for $XXXXX. Based on this information, it would appear likely that the fair market value of the complex was less than $450,000 on XXXXX, the day the construction was substantially completed.

Paragraph 256(2)(c) of the ETA requires, in part, that the particular individual has paid GST/HST in respect of the acquisition of the land that forms part of the single unit residential complex or in respect of any improvements thereto. Based on the information provided, XXXXX has paid GST/HST in respect of the construction materials and services used in constructing the complex. As such, this condition is met. In addition, the Estate paid GST/HST in respect of materials and services acquired to complete the construction of the complex. Taking into account the provisions of section 267 of the ETA which are discussed below, it is our view that the GST/HST paid by XXXXX and the Estate in respect of the completion of the construction of the complex may be included in the calculation of the new housing rebate amount.

Given that XXXXX or XXXXX relation did not occupy the single unit residential complex, subparagraph 256(2)(d)(ii) of the ETA must be considered. Pursuant to this provision, the particular individual is required to make an exempt sale of the complex and ownership must be transferred to the recipient before any individual occupies the complex as a place of residence or lodging. In this case, XXXXX instructed XXXXX Estate to complete the construction of the complex and provided the Executrix with the power to sell the complex in the settlement of the Estate. On XXXXX, the Estate sold the complex to an unrelated third party. The complex was not occupied by any individual prior to the transfer of the ownership in the complex.

The supply of the residential complex made by way of sale by the Estate was exempt pursuant to section 2 of Part I of Schedule V to the ETA. For GST/HST purposes, XXXXX was not a builder as XXXXX had intended the complex to be XXXXX primary place of residence and did not change this intention prior to XXXXX death by engaging in the construction of the complex in the course of a business or an adventure or concern in the nature of trade. Hence, pursuant to section 267 of the ETA, the Estate is not considered to be the builder in this case.

Section 267 of the ETA states, in part, that Part IX of the ETA "... applies as though the estate of the individual were the individual and the individual had not died ..." The ETA recognizes an individual, the estate of a deceased individual and the personal representative of the estate to be separate persons. However, pursuant to section 267, the estate has the same attributes that the individual possessed. For example, where the individual paid tax, the estate will be considered to have paid tax and where the individual is entitled to claim a rebate, the estate will be entitled to claim a rebate.

Based on the above, the condition in subparagraph 256(2)(d)(ii) of the ETA is met. Given that all of the conditions listed in paragraphs 256(2)(a) to (d) are met, the Estate may claim a new housing rebate provided that the fair market value of the single unit residential complex at the time the complex was substantially completed is less than $450,000.

You submitted to us the new housing rebate application that was completed on behalf of the Estate. We are forwarding this application for processing together with a copy of this ruling.

If you require clarification with respect to any of the issues discussed in this letter, please call me at (613) 954-3772.

Sincerely,

Marcel R. Boivin
Manager
Real Property Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate

2005/09/13 — RITS 60479 — GST/HST Implications of an Online XXXXX