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 an individual is a "first-time" home buyer in two different fact situations.
Position TAKEN:
In both cases, yes.
Reasons FOR POSITION TAKEN:
In first situation, although had a spouse in previous 4 years, no spouse at time of withdrawal, so owner-occupation by former spouse irrelevant; in second situation, individual did not inhabit current spouse's home in previous 4 years, so not disqualified.
September 29, 1994
Winnipeg District Office Head Office
J. Purda, Director Rulings Directorate
P. Spice
Attention: Ms Debbie Anderson (613) 957-8953
Enquiries and Adjustments
942417
Home Buyers' Plan - First-Time Home Buyer
This is in reply to your facsimile transmission of September 19, 1994, in which you ask our opinion concerning the interpretation of the proposed amendment to the definition of "eligible amount" in paragraph 146.01(1)(d.1) of the Income Tax Act (the "Act") and the proposed addition of paragraph 146.01(2)(a.1) of the Act. In particular, you describe two fact situations and ask whether the individual would be considered a first-time home buyer and thus eligible to withdraw an amount from the individual's registered retirement saving plan (RRSP) pursuant to the terms of the Home Buyers' Plan. The fact situations and our comments follow.
Situation 1 and Question
John and Mary married in 1990. They lived in Mary's house until their divorce in 1993. John moved out of the house in 1993 and did not receive any interest in the house as a consequence of the marriage breakdown. In 1994 John wishes to withdraw an amount under the Home Buyers' Plan and acquire a home. Does he qualify?
Analysis and Answer
As announced in the March 28, 1994 Press Release, the Department of Finance intends to amend the definition of "eligible amount" to restrict participation in the Plan to individuals who did not have an owner-occupied home in a period beginning at the start of the fourth preceding calendar year that ended before the time of withdrawal and ended on the 31st day before the withdrawal. Also excluded are individuals whose spouses had an owner-occupied home in the same period which home is inhabited by the individual during the spouse's marriage to the individual. (There are also references in the proposed amendment to a share of the capital stock of a cooperative housing corporation that are not relevant to this discussion.) As John wishes to withdraw an amount in 1994, the period of time commences January 1, 1990, and will end 31 days before John withdraws the money.
The proposed addition of paragraph 146.01(2)(a.1) sets out the circumstances in which an individual will be considered to have an owner-occupied home. John will be considered to have an owner-occupied home in the period beginning January 1, 1990 and ending in 1994, if, among other things, he owns a home during that time (not the case in this situation). Paragraph 146.01(2)(a.1) will also apply to the spouse by reason of the wording of proposed subparagraph 146.01(1)(d.1)(ii) of the Act. Therefore, if John's "spouse" owns a home during that time and the home is inhabited by the spouse at any time in that period as the spouse's principal place of residence, and John also inhabited the house during his marriage, John will be ineligible to participate in the new Home Buyers' Plan.
However, in our view, the proposed wording of subparagraph 146.01(1)(d.1)(ii) of the Act limits the exclusion to individuals who have spouses at the time of the withdrawal. Although John had a spouse in the four calendar years preceding the year of the withdrawal and the spouse owned a home in the period which she occupied as a principal residence and which John also inhabited while he was married to that spouse, when John receives the eligible amount, John will not have a "spouse"; it is irrelevant that a former spouse had an owner-occupied home which John used to inhabit during his former marriage. The Technical Notes released with the proposed amendments supports this conclusion. They state that an individual cannot participate in the new Home Buyers' Plan where, "if the individual is married", the individual's spouse owned a home in the relevant period.
Situation 2 and Question
Bob and Carol are married but separated in 1981. They jointly owned a home but Carol moved out in 1981 and Bob remained in the home until it was sold in 1994. Bob and Carol shared the proceeds on the sale. Will Carol qualify as a first-time home buyer in 1994?
Answer
The relevant proposed legislation is cited in part in our Answer to your first Question. In 1994 at the time of withdrawal Carol has a spouse. The spouse also owned a home in the period beginning January 1, 1990, and occupied that home as his principal place of residence in that period. The proposed amendment to the definition of "eligible amount" also requires in clause 146.01(1)(d.1)(ii)(A) that in order to be eligible Carol must not have inhabited the spouse's owner-occupied home "during the spouse's marriage to the individual". In clause (A) the relevant period appears to be only the period of marriage unless the opening words in subparagraph (ii) which refer to the relevant period of ownership by Bob (i.e. during the period beginning January 1, 1990) can be imported to limit the period in clause (A).
It is arguable that the period when an individual inhabits a spouse's owner-occupied home should be coincidental with the period during which the spouse's ownership and use of the home as a principal place of residence is relevant for purposes of the legislation. Carol neither had an owner-occupied home nor lived in a spouse's owner occupied home in the period beginning January 1, 1990. In our view it is reasonable to interpret the proposed amendments to permit an individual such as Carol to participate in the Home Buyers' Plan. Again, the Technical Notes support this conclusion: in referring to the time during which the individual inhabited the spouse's owner occupied home they limit the relevant time to a period in which the marriage (or common-law relationship) subsisted but which also includes a time during the period beginning at the start of the fourth calendar year preceding the year of withdrawal.
In answer to your second question under Situation 2, a married spouse ceases to be a spouse when there is a divorce; and a common-law spouse ceases to be a spouse when the parties have not cohabited for at least 90 days because of a breakdown of their conjugal relationship (paragraph 252(4)(a) of the Act).
We trust these comments assist.
for Director
Financial Industries Division
Rulings Directorate
Policy and Legislation Branch
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