24 March 1997 External T.I. 9707115 - HOME BUYERS PLAN AND 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.

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.

					970711
XXXXXXXXXX				M.P. Sarazin

Attention: XXXXXXXXXX

March 24, 1997

Dear Sirs:

Re: Home Buyers' Plan and Bankruptcy

This is in reply to your facsimile dated March 13, 1997, wherein you requested our views with respect to the following hypothetical situations involving the Home Buyers' Plan ("HBP") and bankrupt individuals.

Situation 1

Where an individual withdraws funds out of his or her RRSP under the HBP, the individual does not purchase a home and the individual makes an assignment in bankruptcy, is the amount withdrawn included in income in the year withdrawn, over a period of time or in the pre-bankruptcy tax return?

Comments

The HBP allows an individual to withdraw up to $20,000 from an RRSP to buy or build a qualifying home. In order to withdraw funds out of an RRSP under the HBP, the individual has to certify that certain conditions will be satisfied. Where the conditions are satisfied, the amount withdrawn would qualify as an "eligible amount" and an "excluded withdrawal", and the withdrawal would not have to be included in the individual's income under subsection 146(8) of the Income Tax Act (the "Act"). Generally, where neither a qualifying home is acquired by the individual nor a repayment, as described in subparagraph (b)(ii) of the definition of excluded withdrawal, is made then the conditions would not be satisfied and the amount withdrawn would be included in the individual's income, under subsection 146(8) of the Act, for the taxation year in which the amount was withdrawn from the RRSP. The expressions "eligible amount" and "excluded withdrawal" have the meanings assigned by subsection 146.01(1) of the Act.

Situation 2

Can an individual that has participated in the HBP include the full amount of any unpaid withdrawals in his or her pre-bankruptcy income tax return?

Comments

Once a home is purchased under the HBP, the Act does not allow an individual to cancel his or her participation in the HBP nor does it allow an individual to accelerate the amounts that have to be included in his or her income. Under the provisions of subsection 146.01(4) of the Act, only the portion of the eligible amount that was not repaid in the particular year as required under the HBP is included in an individual's income for that year. Consequently, an individual cannot include the full amount of any unpaid HBP withdrawals in his or her pre-bankruptcy income tax return.

Situation 3

Can an individual withdraw funds from his or her RRSP under the HBP immediately after acquiring a house?

Comments

One of the conditions that has to be satisfied before an amount will qualify as an eligible amount is that the individual or the individual's spouse did not have an owner-occupied home in the period that began at the beginning of the fourth preceding calendar year that ended before the particular time and ended on the 31st day before the particular time. Therefore, an individual that has acquired a home can still participate in the HBP provided that all of the conditions are satisfied and the amount is withdrawn from his or her RRSP within 30 days of having acquired the home.

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

Yours truly,

for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch