6 February 2001 External T.I. 2001-0065445 - Qualifying under the Home Buyers' Plan

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues:

a) Must an individual be "on title" in order to qualify under the HBP?

b) Must he sign the offer to purchase?

Position:

a) Not necessarily.

b) Not necessarily.

Reasons:

a) Interpretation of the term "acquire" in the definition of "regular eligible amount" in paragraph (c) in subsection 146.01(1). The individual must obtain either legal or beneficial ownership of the property (see IT-437R, par 1, and IT-285R2, par 17).

b) The individual must "enter into an agreement in writing" for the acquisition or construction of the home.

XXXXXXXXXX  								2001-006544
S. E. Thomson
February 6, 2001

Dear XXXXXXXXXX:

Re: Qualifying under the Home Buyers' Plan

This is in reply to your facsimile of January 15, 2001 in which you ask several questions regarding the Home Buyers' Plan (HBP). In particular, a husband and wife each would like to withdraw funds from their respective registered retirement savings accounts (RRSPs) to buy a home, and would like to know if:

1. The husband must be on title to the property?

2. The husband must sign the offer to purchase?

3. The husband must be on the mortgage?

Our Comments

The opinion you seek appears to relate to a specific proposed transaction and, therefore, we bring to your attention to Information Circular IC 70-6R4 Advance Income Tax Rulings, dated January 29, 2001, issued by the Canada Customs and Revenue Agency. Confirmation of tax consequences with respect to proposed transactions involving specific taxpayers will only be provided in response to a request for an advance income tax ruling. However, we can provide you with the following general comments.

Under paragraph (c) of the description of "regular eligible amount" in subsection 146.01(1) of the Income Tax Act (the "Act"), the individual must acquire the qualifying home or a replacement property before the completion date (as defined in the subsection). The term "acquire" is not defined in the Act; however, for purposes of the home buyers' plan, we will consider that the home is "acquired" if the individual obtains either legal ownership (i.e., title), or beneficial ownership. Whether or not an individual has acquired beneficial ownership where he has not obtained legal ownership is a question of fact. Please refer to Interpretation Bulletin IT-437R Ownership of Property (Principal Residence) for a discussion of the term "beneficial ownership". In general, beneficial ownership would entail obtaining all the incidents of ownership such as possession, use and risk relating to the property. Where the individual's name is not on title, the individual would have to establish that he or she indeed has satisfied the tests of "beneficial ownership" and, in fact, made a qualifying acquisition.

Pursuant to paragraph (b) of the same subsection, an amount withdrawn from an individual's RRSP will not be subject to tax if, at the time of the withdrawal, the individual had entered into an agreement in writing for the acquisition of the qualifying home or with respect to its construction. An "agreement in writing" is not defined in the Act, however, for purposes of the home buyers' plan, provided that there is a series of correspondence and/or written documentation that in its totality constitutes the offer by the individual and acceptance of such offer for the acquisition or construction of the qualifying home, we will consider the individual to have entered into "an agreement in writing".

There is nothing in the Act to require that an individual be on the mortgage in order to qualify for the HBP.

We trust that we have been of assistance.

Yours truly,

Roberta Albert, CA
for Director
Financial Industries Division
Income Tax Rulings Directorate