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: For the Home Buyers' Plan (HBP), is an individual eligible if the taxpayer resides in a home that the taxpayer rents from his or her partnership?
Position: No
Reasons: The taxpayers, being the partners of the partnership, own a percentage interest in the manager's quarters [the quarters being partnership property]. Therefore, the taxpayers will be considered to have an owner-occupied home.
XXXXXXXXXX
2010-036402
George A. Robertson, CMA
January 10, 2011
Dear XXXXXXXXXX :
Re: Home Buyers' Plan
This is in response to your electronic request of April 15, 2010 requesting our views on whether an individual eligible for the Home Buyers' Plan (HBP) if the taxpayer resides in a home that the taxpayer rents from his or her partnership?
Written confirmation of the tax implications inherent in particular transactions may only be provided by this Directorate where the transactions are proposed and are the subject matter of an advance income tax ruling submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings, dated May 17, 2002. This Information Circular and other Canada Revenue Agency ("CRA") publications can be accessed on the Internet at http://www.cra-arc.gc.ca/formspubs/menu-e.html. Where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Services Office.
Our Comments
Under the HBP provisions in section 146.01 of the Income Tax Act (the "Act"), an individual can withdraw funds from the individual's RRSP to buy or build a qualifying home. The CRA's general views regarding the HBP are expressed in Guide RC4135, Home Buyers' Plan. In order to participate in the HBP, the individual has to meet several conditions, as described in that guide. Where these conditions are met, the amount withdrawn would not have to be included in the individual's income under subsection 146(8) of the Act. Whether a specific individual would meet all of these conditions is a question of fact.
One of the conditions for the HBP is that the individual qualifies as a first-time home buyer. An individual is not considered a first-time home buyer if, at any time during the period beginning January 1 of the fourth year before the year of the RRSP withdrawal and ending 31 days before the withdrawal, the individual or the individual's spouse or common-law partner had an owner-occupied home. An individual will be considered to have an owner-occupied home where the individual owns (jointly or otherwise) a housing unit and the housing unit is inhabited by the individual as the individual's principal place of residence at that time.
Therefore, one of the conditions for participation in the HBP in 2010 is that an individual cannot have owned and occupied a home as described above at any time during the period beginning January 1, 2006 and ending 31 days before any HBP withdrawal in 2010.
A partnership is not a person, nor is it deemed to be one for the purposes of the Act generally, because the approach of the Act is to treat a partnership as a conduit or flow-through vehicle. In general, partners have an ownership interest, constrained by the partnership agreement, in partnership property.
Based on the information you have provided, the individuals, being the partners of the partnership, collectively own the partnership property, including the manager's quarters which they have occupied for the preceding seven years. Therefore, while the partnership existed, the individuals will be considered to have an owner-occupied home where the individuals owns (jointly or otherwise) a housing unit and the housing unit is inhabited by the individuals as their principal place of residence at that time. The individuals will therefore not meet the time condition set out in section 146.01 of the Act and consequently do not qualify for the HBP.
We trust that the above comments address your concerns.
Yours truly,
Sharmini Ratnasingham
Assistant Director
Ontario Corporate Tax Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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