11 June 2002 External T.I. 2002-0140225 - HOME BUYER'S PLAN DIVORCE

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 CCRA.

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

PRINCIPAL ISSUE:

Whether an individual who jointly owned a home with her ex-husband can participate in the HBP if she is divorced at the time of withdrawal?

Position:

No unless the jointly owned home was sold before January 1, 1998.

REASON:

Application of the Act.

XXXXXXXXXX 2002-014022
L. J. Roy, CGA
June 11, 2002

Dear Madam,

Re: Home Buyers' Plan ("HBP")

This is in reply to your letters of May 7, 2002 wherein you requested our comments on whether you could participate in the HBP since you previously owned a house with your ex-husband which you are now divorced from.

It appears that the opinions you seek relate to specific proposed transactions and, therefore, we bring to your attention Information Circular 70-6R5 dated May 17, 2002, issued by the Canada Customs and Revenue Agency (the "Agency"). Copies of Interpretation Bulletins and Information Circulars are available on the Internet at the following site - http://www.ccra-adrc.gc.ca/formspubs/menu-e.html. Confirmation of tax consequences with respect to proposed transactions involving specific taxpayers would only be provided in response to a request for an advance income tax ruling. However, we can provide you with the following general comments.

The Department's general views regarding the HBP are in the guide titled "Home Buyers' Plan (HBP)" (RC4135). In order to participate in the HBP, an individual has to satisfy several conditions which are described in the Guide. Copies of the Guide are available on the Agency Internet site.

One of the conditions required for participation in the HBP is that the individual qualify as a first-time homebuyer. For participation in 2002, an individual would not be considered a first-time home buyer if, at any time during the period beginning January 1, 1998 and ending 31 days before any HBP withdrawal in 2002, the individual had an owner-occupied home. An individual will be considered to have an owner-occupied home where the individual owns (jointly or otherwise) a housing unit and the housing unit is inhabited by the individual as the individual's principal place of residence at that time. Also, the Income Tax Act does not contain any provision that limits the above-mentioned period when an owner-occupied home was sold as a consequence of a marriage breakdown. Consequently, it is our view that a divorced individual will not be a first-time homebuyer where at the time the withdrawal is made he has jointly owned a housing unit with his/her ex-spouse in the required period.

However, where an individual did not have an owner-occupied home in the required period, an amount will not be eligible for withdrawal if the individual's spouse or common-law partner had an owner-occupied home in that period and during that period the individual inhabited during his/her marriage or common-law partnership. However, when the individual is divorced at the time the withdrawal is made and has not otherwise regained the status of a spouse with someone who owns a house in which the individual cohabits, resides, the individual no longer has an owner-spouse and may qualify for participation in the HBP.

The foregoing opinions are not rulings and in accordance with the guidelines set out in IC 70-6R5 they are not binding on us.

We trust the above comments will be of assistance to you.

Yours truly,

for Director
Financial Industries Division
Income Tax Rulings Directorate
Policy and Legislation Branch

- 2 -