17 August 1993 Administrative Letter 9318846 F - Home Buyers Plan Repayments on Bankruptcy

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.

Client Assistance Directorate Financial Industries Division Mrs. Pauline McNally, Director  

Attention:  Ms Jennifer Loome 

CAD Service Monitoring

Home Buyers Plan

This is in reply to your facsimile transmission of June 28, 1993, in which you request an answer to a question concerning the above-noted subject posed by the Toronto District Office. The question and our answer follow.

QUESTION

It has come to our attention as a result of a query from Consumer and Corporate Affairs that there may be a problem with clients who have borrowed from their RRSP to acquire a house (Homebuyers). In the event of a bankruptcy for those who elect to payback over the 15 years, what happens to the payback?

ANSWER

Technically speaking, the withdrawal from a RRSP is not a borrowing since there is no entity to which the client owes monies. Under the Home Buyers' Plan a client may withdraw funds from any RRSP on a tax-free basis. The client then has an option to either repay the minimum amount in each of the fifteen years to any RRSP('s) or be subject to an income inclusion of the minimum amount in each of the fifteen years. The tax liability arising from the income inclusion would be unaffected by a person's bankruptcy except to the extent that an income tax liability arising from any income inclusion is affected by bankruptcy.

Please note that we have had a similar enquiry from the Thunder Bay District Office (copy enclosed) and attached is a copy of our reply.

for DirectorFinancial Industries DivisionRulings Directorate