30 April 2018 External T.I. 2017-0730991E5 - HBP purchase of portion of housing unit

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: 1. Does the acquisition of a partial interest in a home qualify for purposes of the Home Buyers’ Plan (“HBP”) under section 146.01? 2. Must the interest be registered on the title of the property? 3. What type of written agreement is required? 4. Does the purchase qualify to be exempt from the land transfer tax?

Position: 1. Yes. 2. No. The individual must establish that they obtained either legal ownership or beneficial ownership. 3. The individual must be able to provide sufficient documentation that demonstrates that there is an agreement in writing. 4. Unable to respond.

Reasons: 1. Paragraph 146.01(2)(a) contemplates joint ownership. 2. Jurisprudence. 3. An agreement in writing can take many forms. 4. Not CRA's area of responsibility.

XXXXXXXXXX								2017-073099
W. Doiron
April 30, 2018

Dear XXXXXXXXXX:

Re: Acquisition of a qualifying home for purposes of Home Buyers’ Plan

This is in reply to your email of November 6, 2017 in which you have the following enquiries with respect to eligibility for the Home Buyers’ Plan (“HBP”) under section 146.01 (footnote 1):

1. Would an Individual and their Spouse be considered to have acquired a “qualifying home” where they each purchase a percentage interest in a home located in Canada and the original owner retains a percentage interest in the home?

2. Do both the Individual and the Spouse need to have their interest registered on the title of the property in order for each person to be considered to have acquired a qualifying home for purposes of the HBP?

3. What type of written agreement is required for purposes of the HBP?

4. Does the purchase qualify to be exempt from the land transfer tax?

Our comments

This technical interpretation provides general comments about the provisions of the Income Tax Act and related legislation (where referenced). It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination. The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R7, Advance Income Tax Rulings and Technical Interpretations.

1. Would the Individual and the Spouse be considered to have acquired a “qualifying home” where they only purchase a percentage interest in the home?

The HBP allows an individual to withdraw funds from their registered retirement savings plan to buy or build a home provided that the conditions set out under section 146.01 are met. One of the conditions of the HBP is that the individual must enter into an agreement in writing for the acquisition or the construction of a “qualifying home”, which generally means a housing unit located in Canada. It is the Canada Revenue Agency’s (CRA) position that an individual who acquires a part interest in a housing unit will still qualify under the HBP, provided the other conditions of participation are met.

In this case, the Individual and the Spouse will be considered to have acquired a “qualifying home” despite not purchasing 100% of the home in question.

2. Do both the Individual and the Spouse need to be registered on title of the property?

The term “acquire” is not defined in the Act. For purposes of the HBP, the CRA will consider an individual to have acquired a qualifying home if the individual obtains either legal ownership (i.e., title) or beneficial ownership of the home. Whether an individual has acquired beneficial ownership where they have not obtained legal ownership is a question of fact. Please refer to Income Tax Folio S1-F3-C2, Principal Residence for a discussion of the term “beneficial ownership”. Where the individual’s name is not on title, the individual would have to establish that they have satisfied the tests of “beneficial ownership” and, in fact, made a qualifying acquisition.

3. What type of written agreement is required for purposes of the HBP?

An “agreement in writing” is not defined in the Act. For purposes of the HBP, we will consider an individual to have entered into an agreement in writing provided that there is a series of correspondence and/or written documentation that in its totality constitutes the offer by the individual and the acceptance of such offer for the acquisition or construction of the qualifying home.

4. Does the purchase qualify to be exempt from the land transfer tax?

We suggest that you seek clarification from the provincial or municipal authorities who are responsible for administering land transfer tax legislation in your jurisdiction. The CRA is not involved in administering such legislation.

We trust our comments will be of assistance.

Yours truly,

Dave Wurtele
Acting Section Manager
for Division Director
Financial Industries and Trusts Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch

FOOTNOTES

Note to reader: Because of our system requirements, the footnotes contained in the original document are shown below instead:

1 Unless otherwise stated, all statutory references in this letter are references to the provisions of the Income Tax Act (the “Act”).