2 September 2010 External T.I. 2010-0371701E5 - HBP - Contribution Deduction, and Attribution

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: Are contributions made to an RRSP in the 89-day period immediately before an HBP withdrawal from that RRSP fully deductible if the taxpayer had at least $25,000 in that RRSP before the 89-day period? Does the spousal attribution rule in subsection 146(8.3) apply to an amount withdrawn under the HBP?

Position: Yes. No.

Reasons: Subparagraph 146(5)(a)(iv.1) only restricts the deduction if the amount remaining in an RRSP after the HBP withdrawal from that RRSP is less than the contributions made in the 89-day period immediately before the HBP withdrawal. Subsection 146(8.3) can only apply if an amount is required to be included in income under subsection 146(8) or paragraph 146(12)(b). Since eligible HBP withdrawals do not have to be included in income, attribution does not apply to these withdrawals.

XXXXXXXXXX
									2010-037170
									R. Owen
September 2, 2010

Dear XXXXXXXXXX :

Re: Home Buyers' Plan (HBP)

This is in reply to your email dated June 21, 2010, concerning withdrawals under the HBP and the spousal attribution rules under subsection 146(8.3) of the Income Tax Act (the "Act"). In particular, you have two questions with respect to the HBP.

Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only 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 www.cra-arc.gc.ca. Where the particular transactions are completed, the enquiry should be addressed to the relevant Tax Services Office, a list of which is available on the "Contact Us" page of the CRA Web site. We are, however, prepared to offer the following general comments which may be of assistance.

Our comments

Question 1 - You have enquired whether your contributions made to a particular RRSP in the 89-day period before your HBP withdrawal would be deductible in the year if you already had $25,000 in that RRSP for more than 90 days.

Subsection 146(5) of the Act allows a taxpayer to deduct for a year certain RRSP contributions that the taxpayer makes to an RRSP under which the taxpayer is the annuitant. The maximum amount that can be deducted for the year cannot be more than the taxpayer's "RRSP deduction limit" for the year.

However, subsection 146(5) of the Act also provides that certain RRSP contributions cannot be deducted for any year. In particular, subparagraph 146(5)(a)(iv.1) of the Act provides that a taxpayer cannot deduct for any year contributions made to an RRSP in the 89-day period immediately before an HBP withdrawal from that RRSP unless the amount withdrawn under the HBP is not greater than the balance in that RRSP before those contributions were made. In other words, contributions made to an RRSP in the 89-day period just before an HBP withdrawal from that RRSP can be fully deducted if the value of that RRSP after the withdrawal is at least equal to those contributions.

Based on the above, and provided your RRSP is currently valued in excess of the amount withdrawn, any contributions you make to that RRSP in the 89-day period immediately before an HBP withdrawal from that RRSP will be fully deductible by you to the extent of your RRSP deduction limit .

For more information about this rule, please refer to page 9 and the chart on the last page of the CRA's publication RC4135, Home Buyers' Plan (HBP).

Question 2 - You have enquired whether the spousal attribution rules apply to an eligible withdrawal under the HBP.

The attribution rules in subsection 146(8.3) of the Act generally apply where an RRSP annuitant withdraws an amount from a spousal RRSP, and the annuitant's spouse or common-law partner has contributed to any spousal RRSP for that annuitant in the year of withdrawal or in either of the two previous years. However, the provision only applies to amounts withdrawn that have to be included in the annuitant's income pursuant to subsection 146(8) or paragraph 146(12)(b) of the Act. As an eligible withdrawal under the HBP does not have to be included in the annuitant's income, subsection 146(8.3) of the Act does not attribute any amount to the contributor spouse in respect of that eligible HBP withdrawal.

We trust that our comments will be of assistance to you.

Yours truly,

Mary Pat Baldwin, CA
for Director
Financial Sector and Exempt Entities Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch