Principal Issues: [TaxInterpretations translation] Can an individual's expenses made to purchase property during the eligibility period, but before the individual became the owner of the home, be eligible for the HRTC where the renovations to the property were made during the eligibility period, but after the individual became the owner of the home and after the individual moved into it?
Position: Yes.
Reasons: Legislative analysis.
XXXXXXXXXX 2010-035888 I. Landry, M. Fisc. May 3, 2010
Dear XXXXXXXXXX,
Subject: Home Renovation Tax Credit
This is in response to your fax of March 1, 2010, in which you requested our comments regarding the eligibility for the home renovation tax credit ("HRTC") of certain expenditures made in September 2009 in the following particular situation.
In your fax, you described a situation where an individual was having the individual’s home built. The purchase of the land in front of the notary and the agreement with the contractor to build the housing unit were signed in June 2009. The construction of the housing unit was completed in November 2009 and the individual moved into it in mid-November. Renovation work using property acquired in September 2009 was completed in late November 2009, after the individual had moved into the home.
You asked whether the individual's expenses made to purchase property during the eligibility period, but before the individual became the owner of the housing unit, could be eligible for the HRTC where the renovations relating to such property were made during the eligibility period, but after the individual became the owner of the housing unit and after the individual moved into the housing unit.
Unless otherwise indicated, all legislative references herein are to the provisions of the Income Tax Act (the "Act").
The situation you have described in your letter appears to be related to an actual situation involving specific taxpayers. As explained in Information Circular 70-6R5, Advance Income Tax Rulings, it is not the practice of the Directorate to comment on proposed transactions that relate to specific taxpayers otherwise than in the form of an advance income tax ruling. If your situation involved a specific taxpayer and a completed transaction, you should provide all relevant facts and documentation to the appropriate Tax Services Office for its views. We are, however, prepared to provide the following general comments, which we hope you will find helpful.
Under the legislation for the HRTC, this credit is available, inter alia, where an individual incurs or makes expenses that are directly attributable to a qualifying renovation by the individual and that is the cost of goods acquired or services received during the period that begins on January 28, 2009 and that ends on January 31, 2010.
By virtue of subsection 118.04(1), a qualifying renovation is defined as a renovation or alteration of a property that is at that time an eligible dwelling. In addition, the renovation or alteration must be of an enduring nature and be integral to the eligible dwelling.
By virtue of subsection 118.04(1), an eligible dwelling includes a housing unit located in Canada in respect of which the following conditions are satisfied. First, at the time the renovation or alteration is made, the individual (or a trust under which the individual is a beneficiary) must own, whether jointly with another person or otherwise, the housing unit or a share of the capital stock of a co-operative housing corporation acquired for the sole purpose of acquiring the right to inhabit the housing unit owned by the corporation.
Second, the housing unit must be ordinarily inhabited by the individual, by the individual’s spouse or common-law partner or former spouse or common-law partner or by a child of the individual during the period that begins on January 28, 2009 and that ends on January 31, 2010.
In the situation where an individual constructs the individual’s housing unit on land owned by the individual, it is generally the CRA's view that the individual will be considered to own a housing unit for HRTC purposes as soon as the housing unit is habitable. It should be noted that the determination of when the housing unit has become habitable is essentially a question of fact that must be assessed in light of all the circumstances.
In other words, the housing unit will be an eligible dwelling (as defined in subsection 118.04(1)) if it became habitable at the time of the renovation or alteration and is ordinarily inhabited by the individual, by the individual’s spouse or common-law partner or former spouse or common-law partner or by a child of the individual during the period that begins on January 28, 2009 and that ends on January 31, 2010.
In the situation submitted, the housing unit would be an eligible dwelling of the individual as defined in subsection 118.04(1) as of mid-November. The individual in this situation will be considered to own the housing unit from mid-November 2009 or before that date if the accommodation was habitable before that date, and will ordinarily inhabit it during the period that begins on January 28, 2009 and that ends on January 31, 2010.
Consequently, the individual in this situation can claim the HRTC in respect of expenses made for property acquired in the period beginning January 28, 2009 and ending January 31, 2010 if the renovation work relating to the property is carried out in that period on a housing unit that is, at the time of the renovation, the individual's eligible dwelling.
Best regards,
Louise J. Roy, CGA
Manager
for the Director
Ontario Corporate Tax Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch.