15 June 1993 Income Tax Severed Letter 9312355 - 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.

                                   5-931235
XXXXXXXXXX                         M.Shea-DesRosiers
                                   (613) 957-8953

Attention: XXXXXXXXXX

June 15, 1993

Dear Sir/Madam:

Re: Home Buyers' Plan Legislation

This is in reply to your letter of March 11, 1993 and our telephone conversation of June 10, 1993 (XXXXXXXXXX/Shea- DesRosiers) concerning the application of the proposed legislation regarding Home Buyers' Plan (the "Plan"). We apologize for the delay in replying to your letter.

Written confirmation of the tax implications inherent in particular transactions are given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R2. Where the particular transactions are completed, the enquiry should be addressed to the relevant District Taxation Office. The following comments are, therefore, of a general nature only, and are not binding on the Department.

You enquire as to whether in a situation where an individual, having applied in December 1992 to withdraw $20,000 from his/her RRSP to purchase a home, did not obtain the funds at the time of closing but only several days after the home was acquired, could repay to his/her RRSP the amount withdrawn and a contribution for 1992 could then have been made. The home was purchased with cash on hand. In our telephone conversation referred to above you confirmed that no contribution was made to the individual's RRSP for 1992.

The question is whether the amount withdrawn is an "eligible amount". There are a number of conditions which must be met for a registered retirement savings plan ("RRSP") withdrawal to qualify as an "eligible amount". The following conditions are applicable to an amount received after February 25, 1992 and before March 2, 1993:

      (a)   the amount is received after February 25, 1992 and
            before March 2, 1993 pursuant to a written request
            in prescribed form in which an individual sets out
            the location of a qualifying home that the
            individual has begun, or intends not later than
            one year after its acquisition by the individual
            to begin, using as a principal place of residence;

      (b)   the individual is a resident of Canada from the
            time of withdrawal of the funds to the time the
            qualifying home was acquired, unless the
            qualifying home was acquired before the
            withdrawals were made. Where the qualifying home
            is acquired before any withdrawals are made, the
            individual must be resident of Canada at the time
            funds are withdrawn;

      (c)   the individual entered into an agreement in
            writing before the time funds were withdrawn for
            the acquisition of the qualifying home or with
            respect to its construction;

      (d)   if funds are withdrawn before March 2, 1993, the
            individual must generally acquire the qualifying
            home (or a replacement property for the qualifying
            home) after February 25, 1992 and before 
            October 1, 1993;

      (e)   neither the individual nor his/her spouse acquired
            the qualifying home more than 30 days before the
            time the funds were withdrawn;

      (f)   the total of the amount and all eligible amounts
            received by the individual at or before the
            particular time does not exceed $20,000. 

If all the above conditions are met, the amount received by the individual out of his/her RRSP would qualify as an "eligible amount". An "eligible amount" received by a individual out of an RRSP under the Plan is not included in the individual's income because it is an "excluded withdrawal" (within the meaning assigned by proposed subsection 146.01(1) of the Act) which is not taxable by reason of draft amended subsection 146(8) of the Act.

There are no requirements that the funds withdrawn from the RRSP be used to purchase the home. However, all the conditions pertaining to the Plan must be met and a qualifying home must be acquired.

Once a qualifying home has been acquired, the Plan cannot be cancelled by returning the funds to an RRSP. If the individual does not acquire a qualifying home, the participation in the Plan can be cancelled. If the Plan is cancelled, either the individual repays to his/her RRSP the funds withdrawn under the Plan or includes them in his/her income for the year of withdrawal.

To cancel the participation to the Plan, the individual must complete Part IV of the copy of the form T1036 which was used initially to withdraw the funds, and give it to the RRSP issuer who paid these funds to the individual. The deadline for repaying the funds depends on when they were withdrawn. Where the withdrawal was received before March 2, 1993, the amount must be repaid by December 31, 1993, to the RRSP issuer who paid it to the individual.

It is to be noted that where an individual does not make any RRSP contribution in the year of withdrawal, he/she can carry forward the unused RRSP deduction limit.

We wish to point out that the Department issues advance income tax rulings only for proposed transactions. Furthermore, the Department does not issue rulings on proposed legislation and the Home Buyers' Plan legislation has not yet become law.

We regret the inconvenience that was caused to your clients due to the different opinions they received from the Department on this particular matter.

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

Yours truly,

for Director Financial Industries Division Rulings Directorate