Principal Issues: Whether adding a guarantor to help secure financing of a qualifying home would disqualify eligibility for the HBP.
Position: Provided general comments. No, adding a guarantor would not disqualify eligibility for the HBP provided all conditions required for the HBP are met.
Reasons: Adding a guarantor is not one of the conditions required for qualification under the HBP.
XXXXXXXXXX 2010-035664 S. Bernards June 14, 2010
Dear XXXXXXXXXX :
RE: Home Buyers' Plan
This is in response to your email that we received on February 5, 2010 wherein you enquired with respect to the criteria to qualify for the Home Buyers' Plan ("HBP"). Specifically, you enquired whether the fact that your XXXXXXXXXX who owns her own home and will be on title of your home would disqualify you from being eligible for the HBP. You also requested clarification of the following condition under the HBP: "You have to buy or build the qualifying home before October 1 of the year after the year of the withdrawal".
It is not this Directorate's practice to comment on proposed transactions involving specific taxpayers other than in the form of an advance income tax ruling. For more information about how to obtain a ruling, please refer to Information Circular 70-6R5, Advance Income Tax Rulings, dated May 17, 2002. This Information Circular and other Canada Revenue Agency ("CRA") publications can be accessed on the internet at http://www.cra-arc.gc.ca. Should your situation involve a completed transaction, you should submit all relevant facts and documentation to the appropriate Tax Services Office ("TSO") for their views. We are, however, prepared to provide the following general comments.
Our Comments
You will find the CRA's general views regarding the HBP in the Guide titled "Home Buyers' Plan (HBP)" (RC4135). In order to participate in the HBP, an individual has to satisfy several conditions which are described very clearly in the chart found on page 5 of the Guide. We note that all of the conditions have to be satisfied before an individual will be eligible to participate in the HBP and whether a specific individual would meet all of these requirements for participation in the plan is always a question of fact. A copy of this guide is available from your local TSO or on the internet at the following site - http://www.cra-arc.gc.ca/E/pub/tg/rc4135/rc4135-09e.pdf.
We note from your email that your XXXXXXXXXX will be on legal title as a part owner of the home you have purchased. We assume that you will also be a part owner and therefore be on legal title. You state that you will be occupying the home as your principal place of residence and therefore you will also have beneficial ownership of the home.
One of the conditions under the HBP is that an individual wishing to participate in the HBP must enter into a written purchase agreement before the withdrawal of funds under the plan and must subsequently acquire the qualifying home before the "completion date", which is defined as October 1 of the calendar year following the year of the withdrawal. Generally, we will consider that the home is acquired when the individual obtains legal ownership or title. Therefore, for example, in order to satisfy this particular condition of the HBP for plan withdrawals in 2010, the transfer of title of a qualifying home must occur before October 1, 2011. For more information we refer you to page 8 of the Guide under the heading "You have to buy or build the qualifying home before October 1 of the year after the year of the withdrawal". We note that the condition requiring an individual to buy or build a qualifying home before October 1st of the year after the year of the withdrawal must be met by the individual after all of the withdrawals from the individual's RRSP have been made.
Based solely on the information in your email, it is our understanding that both you and your XXXXXXXXXX intend that only you will be the beneficial owner of the qualifying home and that by putting your XXXXXXXXXX name on the mortgage and deed she is simply acting as a guarantor to the lending institution in respect of the mortgage. If our understanding is correct, we are of the opinion that adding your XXXXXXXXXX as a guarantor to guarantee financing of your home would not preclude you from qualifying for the HBP provided all the other necessary conditions under the HBP are met.
You indicated in your email that the closing date of the acquisition of your home is XXXXXXXXXX . Subject to meeting the other conditions under the HBP, you will have up to 30 days following this date to make a withdrawal from your RRSP to qualify for the HBP.
We hope our comments will be of assistance.
Yours truly,
Mary Pat Baldwin
for Director
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch