Principal Issues: (1) Can an individual who may otherwise be eligible for the HBTC be disqualified if a current home owner is also on legal title with the individual as part owner of a home? (2) What is the acceptable apportionment of the HBTC between the parties in that case?
Position: (1) No, provided that definition of a "qualifying home" is satisfied in subsection 118.05(1) and the qualifying home is legally registered. (2) Provided that multiple parties are eligible to claim the HBTC in respect of a particular qualifying home, the maximum total amount that can be claimed by all the parties is $750. If the individuals cannot agree as to what amount each may claim, the Minister may fix the portions. In this case, only the couple may be eligible for the HBTC since the parents of one of the spouses are already home owners themselves and would therefore not be considered to be first-time home buyers thereby violating one of the conditions in the definition of a "qualifying home" in subsection 118.05(1) of the Act. Consequently, if the couple is eligible to claim the HBTC, only the couple will be able to claim the credit of $750.
Reasons: (1) None of the conditions required to qualify for HBTC in section 118.05 would be violated if a current home owner is on legal title as part owner of the qualifying home. (2) Subsection 118.05(4) of the Act and definition of a "qualifying home" in subsection 118.05(1).
XXXXXXXXXX 2010-036013 S. Bernards June 25, 2010
Dear XXXXXXXXXX :
RE: First-Time Home Buyers' Tax Credit
I am writing in response to your email that we received on March 11, 2010 wherein you enquired whether someone who may otherwise be eligible for the First-Time Home Buyers' Tax Credit ("HBTC") may be disqualified if a current home owner is also on legal title with the individual as part owner of a home and what is the acceptable apportionment of the HBTC between the parties in that case. Specifically, you described a situation where a couple purchased their first home to occupy but the parents (who own their own separate home) of one of the spouses are on legal title for 1% ownership in the home. You enquired whether the couple is still eligible for the HBTC and whether they are able to claim the whole HBTC or only 99% of the HBTC to represent their 99% ownership in the home. You also described a second scenario where the couple are 50% owners and the parents of one of the spouses are 50% owners in the home.
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
Section 118.05 of the Income Tax Act ("Act") provides first-time home buyers with a $750 non-refundable tax credit in respect of a "qualifying home" acquired after January 27, 2009. Pursuant to subsection 118.05(3) of the Act, an individual may claim the HBTC for a taxation year in which a "qualifying home" is acquired.
Pursuant to subsection 118.05(2) of the Act, an individual is considered to have acquired a qualifying home only if the individual's interests (or for civil law, right) in it is registered in accordance with the land registration system or other similar system applicable where it is located.
Paragraph (a) in subsection 118.05(1) of the Act sets out the conditions for a home to be a "qualifying home" in respect of an individual, where the home is acquired for the benefit of that individual. In this regard, the home must be acquired by the individual or by the individual's spouse or common-law partner. The individual must intend to inhabit the home as a principal place of residence not later than one year after its acquisition. As well, the individual must be a first-time home buyer. An individual is considered to be a first-time home buyer for this purpose if, during the four calendar years preceding the year of acquisition, neither the individual, nor the individual's spouse or common-law partner, owned a home that was occupied, generally, by the individual or the individual's spouse or common-law partner.
In this case, subject to meeting the definition of a "qualifying home" in subsection 118.05(1) of the Act and having their interest in the qualifying home legally registered, the couple would not be disqualified from the HBTC merely by the fact that the parents of one of the spouses are on legal title of the qualifying home.
With respect to your second question on the apportionment of the HBTC, subsection 118.05(4) of the Act provides that, where more than one individual is entitled to the HBTC for a taxation year in respect of a particular qualifying home, the total amounts claimed by those individuals cannot exceed the maximum amount that would be allowed if only one individual were claiming the HBTC. If the individuals cannot agree as to what amount each may claim, the Minister of National Revenue may fix the portions.
In this case, we are of the view that the parents of one of the spouses would not be considered to be first-time home buyers as required by one of the conditions in the definition of a "qualifying home" and would not therefore be eligible to claim the HBTC with respect to the couple's home. Provided that the couple is entitled to claim the HBTC in respect of a particular qualifying home, the total amounts claimed by the couple cannot exceed $750.
For more information on HBTC, please refer to our website at: http://www.cra-arc.gc.ca/gncy/bdgt/2009/fqhbtc-eng.html.
We hope our comments will be of assistance.
Yours truly,
Randy Hewlett
Manger
for Director
Ontario Corporate Tax Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch