7 April 1994 External T.I. 9407545 - 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.

Principal Issues:

Whether RRSP annuitant can recharacterize withdrawal under Home Buyers Plan as a taxable event.

Position TAKEN:

No.

Reasons FOR POSITION TAKEN:

Once "eligible amount" withdrawn and home purchased or built within the time limits, no way to cancel participation and make withdrawal taxable - result of wording of section 146.01.

XXXXXXXXXX 940754

April 7, 1994

Dear Sir:

Re: Home Buyers' Plan (the "Program")

This is in reply to your facsimile transmission of March 23, 1994, and your letter of March 22, 1994, in which you ask us to rectify the characterization of a withdrawal from your registered retirement savings plan (RRSP) under the above-noted Program.

The Rulings Directorate can only provide a ruling which is binding on the Department with respect to the tax consequences of proposed transactions. Once a transaction is complete, such as a withdrawal from an RRSP, advice or assistance concerning your tax situation must be provided by your local district taxation office. Although we cannot provide a ruling we can provide the following general comments on the intent of the Program and the tax consequences for participants.

As announced in the 1992 Budget Supplementary Information, the Program was introduced to "allow home buyers to withdraw existing funds from registered retirement savings plans to finance the purchase of a home without having to pay tax on the withdrawal".

You explain that you wished to withdraw money from your RRSP and pay tax on it. Pursuant to subsection 146(8) of the Income Tax Act (unless as otherwise stated all references to this statute are to the Income Tax Act S.C. 1970-71-72,c.63 as amended, consolidated to June 10, 1993 - the "Act") withdrawals from an RRSP are taxable in the year of receipt. An exception is made for withdrawals from an RRSP of an "eligible amount" under the Home Buyers' Plan in accordance with section 146.01 of the Act. Withdrawals of such "eligible amounts" are not subject to tax and the RRSP issuer will not provide a T4RSP slip for such withdrawals. A certain portion of the "eligible amount" must be repaid to an RRSP in each of the fifteen years commencing after 1994; if the minimum repayment is not made in the year, that amount is brought into income. The RRSP annuitant may repay the amount on an accelerated basis so that, for example, the full amount is repaid in 1995.

Once a home is purchased under the Program the legislation does not provide a method to cancel participation. The amounts withdrawn will not be subject to tax unless the RRSP annuitant fails to repay the minimum amounts commencing in 1995.

Enclosed for your information is a copy of the Home Buyers' Plan pamphlet. We are sorry that you were unable to obtain complete information before you decided to withdraw the amounts from your RRSP. We hope, however, that the foregoing comments explain the intent of the legislation and the general tax consequences for participants.

Yours truly,

for Director
Financial Industries Division
Rulings Directorate