Section 146.6

An individual and two unrelated individuals acquired a duplex in equal shares on December 10, 2023 and began living in one of the units as his principal place of residence on December 20, 2023, with the other unit being rented out. On November 2, 2023 (after their having entered into the purchase agreement) he withdrew funds from his FHSA.

In finding that the various references in the “qualifying withdrawal” definition to acquiring a qualifying home include acquiring a co-ownership interest in the home, notwithstanding the absence of a specific deeming rule like s. 146.01(2)(a) providing that the acquisition of a qualifying home includes the acquisition by a taxpayer "jointly with one or more other persons," CRA stated that “it is not clear … that the mere reference to the acquisition of a qualifying home in the context of the definition of ‘qualifying withdrawal’ can exclude the possibility of an acquisition made by the individual jointly with one or more persons” and that “[i]t seems clear that the legislator did not wish to exclude individuals who wish to purchase a qualifying home jointly with one or more persons, even if only for spousal couples.”

Accordingly, an acquisition of an ownership interest in a qualifying home in co-ownership with related or unrelated individuals could so qualify if the other conditions of the definition of "qualifying withdrawal" were satisfied.

(a) If amounts from a deceased holder's FHSA are deposited into the estate's account and then subsequently transferred by it directly to the surviving spouse's FHSA, RRSP or RRIF, does s.146.6(15)(a) deem that indirect transfer to be a transfer from the deceased’s FHSA, to the extent that it is so designated jointly by the legal representative and the surviving spouse in the prescribed form filed with the Minister?

(b) If yes, and as a result of the amounts paid to the estate from the deceased's FHSA being subject to withholding under s. 153(1)(v)(i), the estate does not have sufficient cash to pay the gross proceeds of that FHSA directly to the surviving spouse's FHSA, RRSP or RRIF, is it still possible for the estate to roll over all of the gross proceeds to that FHSA, RRSP or RRIF?

(c) Reverting to (a), if the estate distributed the deceased's FHSA to the surviving spouse, could the surviving spouse make the tax-free transfer to the surviving spouse’s FHSA, RRSP or RRIF.

(a)

CRA responded:

Paragraph 146.6(15)(a) allows the deceased holder's legal representative and the survivor to jointly designate, in the prescribed form filed with the Minister, payments made by the estate to a FHSA, RRSP or RRIF of the survivor to be deemed to have been transferred to the beneficiary's FHSA, RRSP or RRIF directly from the deceased holder's FHSA. In such a case, the amount so deemed to have been transferred directly could be transferred without any immediate tax consequences, provided the conditions of subsection 146.6(7) are satisfied. …

In order to be eligible for a joint designation, amounts must be distributed from the FHSA to the estate before the deceased holder's FHSA ceases to be a FHSA, generally before the end of the year following the year of the holder's death, unless the FHSA ceased to be a FHSA at an earlier date under subsection 146.6(16).

(b)

CRA responded:

The amount that can be designated jointly under paragraph 146.6(15)(a) is limited not only to the proceeds of the deceased holder's FHSA that are distributed to the estate, but also to the amount of the payment made to the surviving spouse's FHSA, RRSP or RRIF account. Therefore, to the extent that the estate does not have sufficient assets to make a payment equal to the gross proceeds of the deceased holder's FHSA to a FHSA, RRSP or RRIF of the surviving spouse, the amount of the joint designation cannot exceed the amount of the payment actually made.

(c)

CRA indicated that since the amount was paid to the survivor and not the applicable registered plan, s. 146.6(15)(a) could not apply, so that there could not be deemed to be a direct transfer from the deceased holder's FHSA to the survivor's FHSA, RRSP or RRIF for the purposes of the rules in ss. 146.6(7) and (8), However, pursuant to s. 146.6(15)(b) the amount paid by the estate to the survivor would be included in computing the survivor's income by virtue of s. 146.6(14), to the extent that it was the subject of a joint designation to that effect in the prescribed form, Form RC724.

No distributions had been made from the FHSA of Individual A, who died on September 1 of Year 1 without a surviving spouse or common-law partner, by December 31 of Year 2 and the property in the FHSA has a fair market value of $30,000 at that time.

Situation 1 – If Individual A had designated three siblings as equal beneficiaries under the FHSA in accordance with provincial law, would each sibling be required to report $10,000 in Year 2?

Situation 2 – If Individual A’s estate had been designated as beneficiary under the FHSA in accordance with provincial law, would it be required to report $30,000 in Year 2?

Situation 3 – If Individual A had not designated any beneficiary under the FHSA so that the FHSA proceeds were payable to the individual’s estate, whose residual beneficiaries per the will were the three siblings, would the estate be required to report $30,000 in Year 2.

CRA noted that where an FHSA ceased to be an FHSA at the end of the year following the year of death of the last holder, proposed s. 146.6(17)(c) provides that the proportion of the FMV of all the property of the arrangement that a beneficiary is entitled to, determined at such time of cessation, is deemed for purposes of s. 146.6(14) to be distributed at that time from the FHSA to the beneficiary, so that such deemed amount is included in the beneficiary’s income for the year under s. 146.6(14). CRA then indicated that, on the assumption that, under the provincial law, the beneficiaries under the FHSA were the siblings in Situation 1, and the estate in Situations 2 and 3, there would be an inclusion in such beneficiaries’ income pursuant to s. 146.6(17)(c).