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 claim the HRTC in respect of property held under a life estate arrangement?
Position: Yes. Co owners of a home can claim qualifying expenditures that have been incurred by them if all of the requirements have been met and the particular home is an eligible dwelling of the individual claiming the HRTC.
Reasons: Where a house is ordinarily inhabited by the individual, it is considered an eligible dwelling for purposes of the HRTC.
XXXXXXXXXX
2010-036029
January 18, 2011
Dear XXXXXXXXXX :
Re: Home Renovation Tax Credit
This is in reply to your fax dated March 15th, 2010 regarding your son's eligibility for the Home Renovation Tax Credit (the "HRTC") as a co-owner of your XXXXXXXXXX New Brunswick property (the XXXXXXXXXX Home) under a life estate arrangement.
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 request submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings, dated May 17, 2002. Where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Services Office. However, we are prepared to provide the following general comments, which are not binding on the Canada Revenue Agency (the "CRA").
Our Comments
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 after January 27, 2009, and before February 1, 2010 (the "Eligible Period").
Co-owners of a property are permitted to claim their respective qualifying expenditures for purposes of the HRTC. Additionally, if you own more than one property, eligible expenses incurred for both properties will generally qualify for the HRTC.
The maximum eligible expenditure for the HRTC is $10,000 based on a family's pooled expenditures which will result in a non-refundable tax credit of up to $1,350. Therefore, the maximum expenditure that a family can claim is $10,000. A family will generally be considered to consist of an individual, the individual's spouse or common-law partner, and the individual's children who are under the age of 18 years throughout 2009. Furthermore, the expenditure limit for the HRTC applies to a family's total expenditures for all of their eligible dwellings and not to each dwelling. However, a housing unit must be an eligible dwelling of the individual incurring the expenditures during the Eligible Period. Generally, an eligible dwelling is a housing unit that is eligible to be an individual's principal residence. A housing unit is generally considered to be eligible to be an individual's principal residence if it is owned by the individual and ordinarily inhabited by the individual, his or her spouse or common-law partner, or his or her children.
Paragraph 11 of IT 120R6- Principal Residence also discusses the "Ordinarily Inhabited" Rule in paragraph 5. It states in part,
The question of whether a housing unit is ordinarily inhabited in the year by a person must be resolved on the basis of the facts in each particular case. Even if a person inhabits a housing unit only for a short period of time in the year, this is sufficient for the housing unit to be considered "ordinarily inhabited in the year" by that person..... for example, a seasonal residence can be considered to be ordinarily inhabited in the year by a person who occupies it only during his or her vacation, provided that the main reason for owning the property is not to gain or produce income.
According to the information provided, your son owned and occupied the XXXXXXXXXX Home during his vacations and during the 2009 year in addition to jointly owning and occupying a home in XXXXXXXXXX with his common-law spouse. Consequently, the XXXXXXXXXX Home and the XXXXXXXXXX home would each constitute an eligible dwelling of your son's during the Eligible Period and he would be eligible to claim the HRTC with respect to qualifying home renovation expenditures incurred for both homes. The qualifying home renovation expenditures incurred for the XXXXXXXXXX Home and the XXXXXXXXXX home will be subject to the family maximum, whereby he and his common-law spouse may only claim, on a combined basis, the HRTC on expenditures up to $10,000.
We trust our comments will be of assistance to you.
Yours truly,
Lita Krantz,
Assistant Director
International & Trusts Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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