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.
Principal Issues: Can an individual settlor of a trust claim the HRTC for renovation expenditures incurred by him/her in respect of a dwelling owned by a personal trust?
Position: Factual Determination
Reasons: The availability of the HRTC is, among other conditions, dependent on who owns the dwelling and, where the trust owns the dwelling, who the beneficiary of the trust is.
XXXXXXXXXX 2010-036097
October 13, 2011
XXXXXXXXXX :
Re: Eligibility for the Home Renovation Tax Credit
This is in reply to your letter regarding the eligibility for the home renovation tax credit (the "HRTC"). In particular, the issue is whether the settlor of an alter ego trust or a joint spousal or common-law partner trust is eligible to claim the HRTC for a renovation expenditure the settlor incurred in respect of a dwelling owned by the trust.
Section 118.04 of the Income Tax Act (the "Act") provides individuals with a temporary 15% non-refundable income tax credit on qualifying home renovation expenditures made to an eligible dwelling by an individual.
Where a home renovation expenditure is made or incurred by an individual, it must be directly attributable to a qualifying renovation made to an eligible dwelling at any time after January 27, 2009, and before February 1, 2010 (the "Eligible Period").
An eligible dwelling is generally a housing unit located in Canada that is owned by the individual, or a trust under which the individual is the beneficiary, at the time of the renovation, and ordinarily inhabited by the individual during the Eligible Period.
Based on the information provided, a trust is the legal owner of the housing unit located in Canada that is ordinarily inhabited by the settlor. Therefore, where the individual settlor is also the beneficiary of an alter ego trust or a joint spousal or common-law partner trust as defined under subsection 248(1) of the Act, and the other conditions in section 118.04 of the Act have been met, the individual's renovation expenditure would qualify for the HRTC.
The determination of whether a settlor of a trust has beneficial ownership is a question of fact that can only be made after consideration of the trust agreement and all other facts and circumstances of a particular case. The concept of legal and beneficial ownership for tax purposes is discussed in Interpretation Bulletin IT-437R, Ownership of Property (Principal Residence). Paragraph 3 of IT-437R states in part:
One person's legal ownership of a property may, however, be subject to another person's beneficial ownership of that property. The term "beneficial ownership" is used to describe the type of ownership of a person who is entitled to the use and benefit of the property whether or not that person has concurrent legal ownership. A person who has beneficial ownership rights but not legal ownership can enforce those rights against the holder of the legal title. For example, beneficial ownership frequently arises when property is held in trust for a person in circumstances where, according to the terms of the trust, that person has authority to instruct the trustee to deal with the property as requested.
You can find more information on the HRTC on the Canada Revenue Agency Web site at www.cra.gc.ca/hrtc and in the Government of Canada brochure available at www.actionplan.gc.ca/grfx/docs/hrtc_eng.pdf.
We trust our comments will be of assistance to you.
Yours truly,
Lita Krantz, CA
Assistant Director
Ontario Corporate Tax Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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