10 April 2008 Internal T.I. 2008-0269911I7 - HBP - Income Inclusion

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: Will the attribution rules in subsection 146(8.3) of the Act apply to an income inclusion under the provisions dealing with the Home Buyers Plan where the original amount was withdrawn from a spousal RRSP?

Position: No

Reasons: Wording of the legislation

Mr. Domenic Ranallo
Senior Programs Officer
Individual Returns and Payment Processing Directorate
									2008-026991
									Kimberly Duval, CA
									613-957-2115
April 10, 2008

Re: Spousal attribution rules and the Home Buyers Plan

This is in response to your e-mail correspondence to us of February 29, 2008 requesting our views as to whether the attribution rules in subsection 146(8.3) of the Income Tax Act (the "Act") would apply in a particular fact situation you are considering. Specifically, where a husband contributes an amount to a spousal RRSP in 2007 and his wife later withdraws this amount in the same year as a regular eligible amount under the Home Buyers Plan ("HBP"); if she fails to repay the required amount under the provisions of the HBP in 2009, will subsection 146(8.3) of the Act apply to attribute the income inclusion under subsection 146.01(4) to the husband.

Our Comments:

The special attribution rules in subsection 146(8.3) of the Act will generally apply where an annuitant withdraws an amount from a spousal RRSP and the annuitant's spouse has contributed to a spousal RRSP for that annuitant in the year of withdrawal or in the two previous years. This special attribution rule is designed to discourage the short-term use of spousal RRSPs as a means of income splitting.

In our view, where an amount is contributed to a spousal RRSP and subsequently withdrawn as a regular eligible amount as defined for purposes of the HBP provisions in subsection 146.01(1) of the Act, subsection 146(8.3) of the Act will have no application. It is our position that the legislation, as it is presently worded in subsection 146(8.3) of the Act, clearly limits its application to situations where the income inclusion to the annuitant is pursuant to subsection 146(8) or paragraph 146(12)(b) of the Act.

As such, with respect to the case you are currently considering, it is our view that the income inclusion, as calculated pursuant to 146.01(4) of the Act, will be reported as an income inclusion to the wife and ultimately taxable to her under paragraph 56(1)(h.1) of the Act.

We trust that these comments will be of assistance.

For your information a copy of this memorandum will be severed using the Access to Information Act criteria and placed in the Canada Revenue Agency's electronic library. A severed copy will also be distributed to the commercial tax publishers for inclusion in their databases. The severing process will remove all material that is not subject to disclosure, including information that could disclose the identity of the taxpayer. Should your client request a copy of this memorandum, they can be provided with the electronic library version, or they may request a severed copy using the Privacy Act criteria, which does not remove client identity. You should make requests for this latter version to Mrs. Jackie Page at (819) 994-2898. A copy will be sent to you for delivery to the client.

Yours truly,

Mary Pat Baldwin, CA
for Director
Financial Sector and Exempt Entities Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch