18 October 2000 External T.I. 2000-0036155 - HOME BUYER'S PLAN

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.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues:

Will a withdrawal under the Home Buyers' Plan affect the calculation of Part XI tax in respect of the foreign property held by an RRSP.

Position:

Yes

Reasons:

A withdrawal from an RRSP under the Home Buyers' Plan does not create a debt obligation, loan or mortgage. It is simply a tax-free withdrawal of funds out of the plan which may become taxable if it is not repaid to the plan within a specified period. The withdrawal will reduce the total cost amount of property held in the plan and this in turn may result in the application of Part XI tax if the foreign property held in the plan exceeds the allowable limits based on the reduced cost amount of the property held.

XXXXXXXXXX 		2000-003615
W. C. Harding
October 18, 2000

Dear XXXXXXXXXX:

Re: Home Buyers' Plan Withdrawals and Effect on Part XI Tax Calculation

This is in reply to your latter of May 3, 2000, addressed to the Surrey Tax Centre and referred to us for reply.

Written confirmations of the tax implications inherent in particular transactions are given 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 the Canada Customs and Revenue Agency (the "Agency") Information Circular IC70-6R3 Advance Income Tax Rulings, a copy of which may be obtained from your local tax services office or on the Internet at http://www.ccra-adrc.gc.ca/E/pub/tp/706r3et/706r3e.txt.html. However, we are prepared to provide the following comments which are general in nature and are not binding on the Agency.

A withdrawal from an RRSP under the Home Buyers' Plan does not create a debt obligation to the RRSP by the annuitant of the RRSP. It is simply a tax-free withdrawal of funds out of the Plan. There is no legal obligation for the annuitant to repay the amount to the RRSP and the annuitant may decide not to repay all or a portion of the withdrawal. However, if any amount is not repaid in accordance with the terms of the Home Buyers' Plan, an amount may be included in the income of the annuitant.

Since a withdrawal under the Home Buyers' Plan does not create a loan or debt obligation to the RRSP, it will reduce the total cost amount of the property held in the RRSP. This in turn may result in the application of Part XI tax to the plan if the foreign property held in the plan exceeds the limit allowed based on the reduced total cost amount of all the property held.

We trust this explanation will be of assistance to you.

Yours truly,

P. Spice
for Director
Financial Industries Division
Income Tax Rulings Directorate
Policy and Legislation Branch

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