1 October 2004 External T.I. 2004-0090031E5 - RRSP Withdrawal and 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.

Principal Issues: General questions regarding withdrawal of amounts under the Home Buyers Plan

Position: Questions of fact

Reasons: Based on the legislation, the definition of "regular eligible amount" paragraph (c), (d), and (e).

2004-009003
XXXXXXXXXX Kimberly Duval
(613) 957-2747
October 1, 2004

Dear XXXXXXXXXX:

Re: Home Buyers' Plan

This is in response to your facsimile of August 9, 2004 wherein you requested our opinion with respect to the possibility of withdrawing an amount from your Registered Retirement Savings Plan ("RRSP") for participation in the Home Buyers Plan ("HBP"). Specifically, you have asked whether the purchase of an equity interest in your fiancé's home would qualify under the HBP. Further, you have asked whether the transfer of title or the withdrawal of funds must occur before the wedding date, in order to be considered a qualifying withdrawal under the plan.

Our Comments

The particular situation outlined in your letter relates to a factual one, involving a specific taxpayer. As explained in Information Circular 70-6R5, Advanced Income Tax Rulings, it is not this Directorate's practice to comment on proposed transactions involving specific taxpayers other than in the form of an Advanced Income Tax Ruling. However, we are prepared to offer the following general comments that may be of assistance. Note that all publications referred to herein can be accessed on the Canada Revenue Agency ("CRA") website at the following address: http://www.cra-arc.gc.ca/formspubs.

An amount may be withdrawn from an individual's RRSP without tax consequences in the year provided the withdrawal is made to buy or build a qualifying home in accordance with the HBP provisions in section 146.01 of the Income Tax Act ("the Act"). As you are aware, the CRA's general views regarding the HBP are expressed in tax guide RC4135 entitled Home Buyers' Plan. In order to participate in the HBP, an individual must satisfy several conditions, as described in that guide. Whether a specific individual would meet all of these requirements for participation in the plan is always a question of fact.

For purposes of the HBP, the term "qualifying home" is defined in section 146.01 of the Act to include both an existing home and a newly constructed housing unit located in Canada. The legislation does not preclude the purchase of an equity interest in an existing home from qualifying under the HBP, provided the other conditions of participation are met.

One such condition, pursuant to the definition of "regular eligible amount" in subsection 146.01(1) of the Act, requires the individual to qualify as a first-time homebuyer in a pre-determined period. This means that the individual cannot have had an owner-occupied home during the period beginning January 1 of the fourth year before the year of the withdrawal and ending 31 days before the withdrawal.

Another condition prevents a withdrawal from qualifying as a "regular eligible amount" if, at any time during the same period, the individual's spouse or common-law partner (as that term is described in the glossary of RC4135) had an owner-occupied home that the individual inhabited during their marriage or common-law relationship. However, if the individual has no spouse or common-law partner at the time the application to withdraw funds under the HBP is made, this condition would have no application.

Further, an individual wishing to participate in the HBP must enter into a written purchase agreement before the withdrawal of funds under the plan and must subsequently acquire the qualifying home before the "completion date", which is defined as October 1 of the next calendar year. Generally we will consider that the home is acquired when the individual obtains legal ownership or title. Therefore, for example, in order to satisfy this particular condition of the HBP for plan withdrawals in 2004, the transfer of title of a qualifying home must occur before October 1st 2005.

Another condition for participation under the HBP requires that neither the individual nor the individual's spouse or common-law partner own the qualifying home for more than 30 days before the withdrawal of funds from the RRSP. Therefore, if an individual is married or living in a common-law relationship at the time the funds are withdrawn under the HBP, this condition will apply equally to both the individual and his or her spouse or common-law partner. In other words, this condition will not be met when an individual is married, or living common-law, and either the individual or his or her spouse or common-law partner has owned the qualifying home for a period in excess of 30 days before the funds are withdrawn under the plan.

We trust these comments will be of assistance.

Yours truly,

Roxane Brazeau-LeBlond, C.A.

for Director
Financial Industries Division
Income Tax Rulings Directorate