Section 146.01

In confirming that a judgment declaring a sale of a home to be void would not affect the operation of the HBP rules where the home in question was acquired under an HBP, CRA stated:

Eligibility for withdrawing funds from an RRSP under the HBP … is not affected by the occurrence of subsequent events. As a result, once all the conditions to participate in the HBP are met and a withdrawal has been made from an RRSP, it is not possible to cancel participation in the HBP. … In addition, subject to special repayment situations, the repayment period for withdrawals under this HBP remains unchanged by the voiding of the sale.

An individual, who had an HBP balance of $5,000 at the beginning of the year 202X, contributed $5,000 to his RRSP on May 7, 202X to repay that HBP balance. On March 25, 202X+1, when filing his T1 return for 202X, he designated (on Sched. 7 to the return) that contribution as an HBP repayment for 202X. Will he be able to participate in the HBP again from January 1, 202X+1, or must he wait until March 25, 202X+1, the date he filed his 202X return with the designation?

CRA responded:

Assuming that all other HBP eligibility conditions are satisfied, if the individual wishes to participate in the HBP again in 20XX+1, he will only be able to do so from March 25, 20XX+1, the date on which the individual's tax return for 20XX with Schedule 7 is filed, indicating that he designates the amount contributed to his RRSP in 20XX as a repayment under the HBP. It is only from the time he indicates that the amount paid during the year 202X is a repayment under the HBP, pursuant to subsection 146.01(3), that his HBP balance will be nil at the beginning of calendar year 202X+1, as required by paragraph (i) of the definition of “regular eligible amount”.

As part of the rules for allowing an individual to participate in a home buyers’ plan (HBP) in more than one calendar year, individuals can have a fresh participation period in which they can make a further HBP withdrawal if they have contributed amounts to their RRSP that are designated to be non-deductible HBP repayments, so as to reduce their “HBP balance” to nil. In particular, in order for a withdrawal to qualify as a “regular eligible amount,” para. (i) of the definition thereof requires the individual’s HBP balance at the beginning of the withdrawal year be nil.

An individual, who separated in September 2021, withdrew from his HBP on January 20, 2022 in order to purchase a new qualifying home, and made an RRSP contribution of $5,000 in February 2022 to repay his HBP balance for the 2021 taxation year.

CRA indicated that although, once this contribution was made and the prescribed form filed, it would have reduced his HBP balance as at January 1 of that year, at the time of the withdrawal these conditions (re the contribution and filing) had not yet been satisfied, so that the requirement for a nil HBP balance was not satisfied. Hence, the withdrawal did not qualify.

Regarding the purchase of a unit that consisting of a leasehold interest in the property and a number of shares in the corporation that owns the property, CCRA noted that advance rulings had found that a unit consisting of a leasehold interest and shares, and giving its holder the right to the personal enjoyment of the housing unit would be a housing unit for the purposes of the definition of "principal residence", and that the acquisition of such a unit could qualify as a qualifying home for HBP purposes.

In finding that the definition of "qualifying home" include a residential unit in a semi-commercial building, CRA stated:

[S]ingle-family homes, semi-detached homes, townhouses, mobile homes, condominium units, and apartments in duplexes, triplexes, fourplexes or apartment buildings, are all considered qualifying homes. … [A] housing unit in a semi-commercial building would also be a "qualifying home" … .

In addition, the qualifying home must be occupied as a principal place of residence within one year of acquisition. The term "principal place of residence" is not defined … .

The purchase by an individual of the interest of a former common-law spouse in a jointly-owned home would qualify as the acquisition of a "qualifying home".

A couple (Mr. and Ms. X), currently live in an apartment which they rent from the co-owners, who include Ms. X. Can they avail themselves of the HBP rules for the purchase of a new residence? In responding negatively, CCRA first noted that s. 146.01(2)(a.1) provided that a joint owner of a housing unit is deemed to have an owner-occupied housing unit if the housing unit is inhabited by the individual as the individual’s principal place of residence at that time, and then stated:

[CCRA] generally considers an individual's principal place of residence to be the place where the individual maintains a self-contained domestic establishment. According to subsection 248(1), a self-contained domestic establishment is a dwelling-house, apartment or other similar place of residence in which place a person as a general rule sleeps and eats. The Agency considers a residence to be a self-contained domestic establishment if it is a residential unit to which access is restricted and which has a kitchen, bathroom and sleeping space. …

… Mr. and Ms. X will not be able to avail themselves of the HBP rules … .

After referencing the vacant possession test, CRA stated (TaxInterpretations translation):

[W]hen the individual receives the keys to the unit, and the time at which it is agreed with the vendor that the individual can move in, are key factors.

At the 2010 APFF Financial Strategies and Instruments Roundtable, a Finance representative indicated that one of the factors which CRA could take into account in determining whether an HBP withdrawal made after January of a year was to be deemed under s. 146.01(2)(d) to have been received at the end of the preceding year, was whether the RRSP balance at that year end was sufficiently elevated to support that withdrawal. If often occurs that a purchase that is made in one year does not close until after January of the following year.

If the RRSP balance on December 31, 2017 is sufficient to cover the RRSP withdrawal subsequent to January of 2018, will CRA automatically apply its discretion under s. 146.01(2)(d) such that the withdrawal is deemed to have been made at the end of 2017; and which other factors if any does CRA take into account in exercising that discretion? CRA responded:

The mere fact that, in the situation described, the RRSP balance at December 31, 2017 is sufficient to cover the RRSP withdrawal made in 2018, at a time that is after January 2018, would not, in itself, be sufficient for that Ministerial discretion to be automatically applied, since only a full examination of the facts and circumstances of a particular situation can permit the exercise of that discretion.

In exercising her discretion, the Minister may consider, in addition to the RRSP balance at December 31, 2017, the dates on which the amounts required for withdrawal were contributed and the reasons for the withdrawals being made over a period that straddled two calendar years. However, this is not an exhaustive list. …

HBP participants who withdraw over more than one year will generally be contacted by the CRA to confirm details of their participation.

Two spouses (Mr. X and Ms. Y), who had been living in a home owned by Mr. X, did not cease to be spouses when they started living separate and apart in the same house, as such status would not cease until divorce. Accordingly, in order for a withdrawal, made later in the same year of their having started to live separate and apart, from her RRSP to qualify as a home buyer plan (HBP) withdrawal, resort was necessary by Ms. Y to s. 146.01(2.1)(a), which would deem both her and Mr. X not to have owned an owner-occupied home 90 days after such separation date, so that Ms. Y would not be precluded from making an HBP withdrawal by virtue of her spouse (Mr. X) in fact having been such an owner-occupant.

It would make no difference if the house was co-owned by the two spouses (or if they were common-law partners) – rather than owned only by Mr. X. Again, once they had been living separate and apart for 90 days, then s. 146.01(2.1)(a) would deem Ms. Y and her spouse not to have had an owner-occupied home, provided that she satisfied the additional condition (in 146.01(2.1)(a)(iii)(A)) that she will have disposed of her co-ownership interest by the end of the second calendar year following that of her HBP withdrawal. Furthermore, in light of s. 146.01(2.1)(b), the “qualifying home” acquired by Ms. Y for HBP purposes could be the co-ownership interest of her spouse.