20 June 2005 GST/HST Interpretation 59136 - Taxable benefits

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.

Thank you for your memoranda XXXXX (with attachments), to the XXXXX GST/HST Rulings Centre, concerning the availability of a Goods and Services Tax (GST)/Harmonized Sales Tax (HST) new housing rebate to the Estate of XXXXX, pursuant to section 256 of the Excise Tax Act ("the ETA"). You also provided additional information XXXXX. Your request has been transferred to the Real Property Unit of the Excise and GST/HST Rulings Directorate for response.

All legislative references are to the ETA and the regulations therein, unless otherwise noted.

Facts

Based on the information you have provided, our understanding of the facts is as follows:

1. On XXXXX, a fire damaged the house owned by XXXXX. XXXXX perished in that fire.

2. XXXXX left a handwritten will naming XXXXX as beneficiaries of XXXXX estate. XXXXX lived in the house both before and after the fire.

3. The insurance proof of loss form lists the insured as the Estate of XXXXX and was signed by XXXXX on behalf of the estate.

4. The house was subsequently restored to its pre-loss condition. The renovation was completed XXXXX. For GST/HST purposes, the house was substantially renovated.

5. XXXXX signed the contract with the builder to complete the renovations. The builder billed XXXXX ("the adjuster") and named the client, XXXXX, as the insured. The insurer paid the builder directly. You do not know in what capacity XXXXX signed documents regarding the renovations. You do not know who was required to pay the GST on the renovations, although the adjuster has stated that XXXXX would have been legally responsible to pay the GST/HST with respect to the renovation costs.

6. A new housing rebate application filed in the name of the estate, signed by XXXXX, was denied XXXXX. The appeal period has expired and a notice of objection has not been filed by the estate.

ISSUE

You are now inquiring whether the new housing rebate should have been paid to the estate pursuant to section 256.

DECISION

Given that the rebate application has been denied, additional information is not readily available at this time. However, based on the limited facts set out above, we can conclude that the estate is not entitled to claim a rebate pursuant to section 256. Our general views with respect to the requirements set out in section 256 and their application to the circumstances of this case are as follows.

Section 256 - Rebate for owner-built homes

Pursuant to subsection 256(2), an individual may qualify for a partial rebate of the tax paid on the construction or substantial renovation of a single unit residential complex for use as their primary place of residence or that of a relation. This provision requires that the particular individual has paid GST/HST in respect of the acquisition of the land that forms part of the complex and/or construction materials and contracting services in respect of improvements to the land or the complex (footnote 1); the fair market value of the complex at the time of substantial completion is less than $450,000; and either the first individual to occupy the complex after the construction or substantial renovation is begun is the particular individual or a relation of the particular individual or the particular individual makes an exempt sale of the complex, such that ownership is transferred before it is occupied by any individual as a place of residence or lodging.

Paragraph 256(2)(a) - Particular Individual

Paragraph 256(2)(a) specifically applies to individuals that construct or substantially renovate a single unit residential complex for use as their primary place of residence or that of a relation of the individual. "Person" in subsection 123(1) means "an individual, a partnership, a corporation, the estate of a deceased individual, a trust, or a body that is a society, union, club, association, commission or other organization of any kind". The terms "individual", "personal trust" and "testamentary trust"(footnote 2) are also defined in subsection 123(1) and are separate persons for purposes of the ETA.

Section 267 - Estate of a deceased individual

Section 267 states, in part, that Part IX "...applies as though the estate of the individual were the individual and the individual had not died ..." In our view this provision does not deem anything done by the estate to be done by the individual where the estate acquires property or services during the course of the administration of the estate (e.g., legal and accounting services).

The ETA recognizes an individual, the estate of the deceased and the personal representative of the estate to be separate persons when making or acquiring supplies. It is our view that, pursuant to section 267, the estate has the same attributes under Part IX that the individual had when living. For example, where the individual used the property in the course of commercial activities while living, the estate will be considered to have used the property in the course of commercial activities; where the individual had paid tax while living, the estate will be considered to have paid tax; and where the individual had claimed ITCs while living, the estate will be considered to have claimed the ITCs.

Thus, where the estate is the person making or acquiring supplies (i.e., incurring expenses), section 267 does not state that the individual is making or acquiring those supplies. It is our view that the estate is making or acquiring supplies in its own right as a separate person for GST/HST purposes. Consequently, where the estate substantially renovates the single unit residential complex of the deceased, section 267 does not operate to deem the estate to be the deceased individual so that the deceased individual could be considered as the "particular individual" who substantially renovated the complex for purposes of paragraph 256(2)(a).

In this case, the estate would not be eligible for the new housing rebate with respect to the GST paid on renovation costs. The requirement under paragraph 256(2)(a) is not met where it is the estate and not an "individual" that engaged a person to substantially renovate the single unit residential complex of the deceased.

However, where a particular individual would have been otherwise eligible for the new housing rebate under section 256 prior to death, the estate may make application on behalf of the deceased individual.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 957-8226.

FOOTNOTES:

1. Memorandum 19.3.4, Rebate for Owner-Built Homes, provides a list of expenses that are included in the "total tax paid by the individual".

2. The term "testamentary trust", included in the meaning of "personal trust", has the meaning assigned by subsection 248(1) of the Income Tax Act ("the ITA"), which includes an estate arising as a consequence of the death of an individual.

2005/06/24 — RITS 59654 — Permanent Establishment