Translation disclaimer
This translation was prepared by Tax Interpretations Inc. The CRA did not issue this document in the language in which it now appears, and is not responsible for any errors in its translation that might impact a reader’s understanding of it or the position(s) taken therein. See also the general Disclaimer below.
Principal Issues: [TaxInterpretations translation] Will an individual who builds a home on land the individual owns from July 1 to November 30, 2009 for $100,000 be eligible for the HRTC if the individual begins living in the home on November 30, 2009 and incurs additional expenses of $20,000 after moving into the home?
Will an individual who builds a home on land the individual owns from July 1 to November 30, 2009 for $100,000 be eligible for the HRTC if the individual begins living in the home on November 30, 2009 and incurs no additional expenses on the land after it is built?
Will an individual who builds a home on land the individual owns from July 1 to November 30, 2009 for $100,000 be eligible for the HRTC if the individual does not move into the home until February 10, 2010?
Position: Question of fact. In particular, the individual must have an eligible dwelling and must have incurred expenses directly attributable to qualifying renovations:
Yes, if expenses incurred after November 30, 2009 to January 31, 2010 are directly attributable to qualifying renovations.
No, since no expenses directly attributable to qualifying renovations were incurred after November 30, 2009.
No, the housing unit is not an eligible dwelling.
Reasons: Legislative analysis.
Legislative analysis.
Legislative analysis.
XXXXXXXXXX 2010-035480
I. Landry, M. Fisc.
February 16, 2010
Dear XXXXXXXXXX,
Subject: Home Renovation Tax Credit
This is in response to your email of January 20, 2010, in which you asked for our comments regarding eligibility for the home renovation tax credit ("HRTC") in the following situations:
1. an individual builds a home on land owned by the individual from July 1 to November 30, 2009 for $100,000. The individual begins living in the home on November 30, 2009, and after the individual has moved into the home and before February 1, 2010, the individual incurs additional expenses of $20,000;
2. an individual builds a home on land owned by the individual from July 1 to November 30, 2009 for $100,000. The individual begins living in the home on November 30, 2009, and does not incur any additional expenses after the home is built;
3. an individual builds a home on land owned by the individual from July 1 to November 30, 2009 for $100,000, but does not live in the home until February 10, 2010.
Unless otherwise indicated, all legislative references herein are to the provisions of the Income Tax Act (the "Act").
The situation you have indicated in your letter appears to be related to an actual situation involving specific taxpayers. As explained in Information Circular 70-6R5, Advance Income Tax Rulings, it is not the Directorate's practice to comment on proposed transactions involving specific taxpayers otherwise than in the form of an advance income tax ruling. If your situation involves a specific taxpayer and a completed transaction, you should provide all relevant facts and documentation to the appropriate Tax Services Office for its views. We are, however, prepared to provide the following general comments, which we hope you will find helpful.
Under the legislation for the HRTC, the credit is available, inter alia, where an individual incurs or makes expenditures during the period beginning January 28, 2009 and ending January 31, 2010 that are directly attributable to eligible renovation work performed by that individual.
By virtue of subsection 118.04(1), a qualifying renovation is defined as a renovation or alteration, of a property that is at that time an eligible dwelling of the individual or of a qualifying relation in respect of the individual, that is of an enduring nature and that is integral to the eligible dwelling.
By virtue of subsection 118.04(1), an eligible dwelling includes a housing unit located in Canada in respect of which the following conditions are satisfied. First, at the time of the qualifying renovation, an individual, or a trust of which the individual is a beneficiary, must own, jointly with another person or otherwise, the housing unit or a share of the capital stock of a co-operative housing corporation acquired for the sole purpose of acquiring the right to inhabit the housing unit owned by the corporation.
Second, the housing unit must be ordinarily inhabited by the individual, by the individual’s spouse or common-law partner or former spouse or common-law partner or by a child of the individual during the period that begins on January 28, 2009 and that ends on January 31, 2010.
In the situation where an individual builds the individual’s housing unit on land owned by the individual, it is generally the CRA's view that the individual will be considered to own a housing unit for HRTC purposes as soon as the housing unit is habitable.
In other words, the housing unit will be an eligible dwelling (as defined in subsection 118.04(1)) if it became habitable at the time of the renovation or alteration and is ordinarily inhabited by the individual, by the individual’s spouse or common-law partner or former spouse or common-law partner or by a child of the individual during the period that begins on January 28, 2009 and that ends on January 31, 2010. If this is the case, expenses incurred or made from the time the dwelling became habitable to January 31, 2010, that are directly attributable to qualifying renovations will be eligible for the HRTC.
In the first situation submitted, the housing unit, assuming it became habitable on November 30, 2009, will be an eligible dwelling as defined in subsection 118.04(1). An individual in this situation will be considered to own the unit on or after November 30, 2009 since the unit became habitable on that date and will ordinarily have inhabited the housing unit during the period that begins on January 28, 2009 and that ends on January 31, 2010. Consequently, an individual in this situation may claim the HRTC in respect of expenses incurred after November 30, 2009 up to January 31, 2010 that are directly attributable to qualifying renovations.
On the other hand, an individual in the second situation submitted cannot claim the HRTC since the individual did not incur any renovation or alteration expenses after November 30, 2009, i.e., after the individual was considered to own the housing unit.
Similarly, an individual in the third situation submitted cannot claim the HRTC since the housing unit does not qualify as an eligible dwelling. In order for a unit to qualify as an eligible dwelling, the individual, the individual's spouse or former spouse, common-law partner or former common-law partner, or a child of the individual must have ordinarily inhabited the housing unit during the period that begins on January 28, 2009 and that ends on January 31, 2010, which is not the case in this situation.
Best regards,
Louise J. Roy, CGA
Manager
for the Acting Director
Ontario Corporate Tax Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch.
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