Principal Issues: [TaxInterpretations translation] In certain situations, could a member of a partnership claim the HBTC?
Position: Yes, as long as the partner and the housing unit satisfy all the conditions of section 118.05.
Reasons: By virtue of an administrative position applicable for purposes of the HBTC, the CRA generally accepts that a partner of a partnership may claim the HBTC if the partner and the housing unit satisfy all the conditions of section 118.05. Similar positions taken for principal residence purposes and the HRTC.
XXXXXXXXXX 2010-036899 I. Landry, M. Fisc. July 26, 2010
Dear Mr. XXXXXXXXXX,
Subject: First-Time Home Buyers' Tax Credit
This is in response to your email of May 27, 2010, in which you asked us whether a member of a partnership could claim the first-time home buyers' tax credit ("HBTC") in the following two hypothetical situations.
In the first situation, a partnership was formed in 2009 and acquired land together with the residence and farm buildings after January 27, 2009. The members of this partnership were two spouses, Mr. X and Mrs. X. You wish to know if either Mr. X or Mrs. X would be able to claim the HBTC or share it between them in this first hypothetical situation.
In the second situation, a partnership was created in 2000. The members of this partnership were two spouses and their adult son, namely, Mr. Y, Mrs. Y and Son Y. Since its creation, this partnership owned a residence which, at all relevant times, was exclusively occupied by Mr. Y and Mrs. Y. After January 27, 2009, the partnership built a second residence which, at all relevant times, was exclusively occupied by Son Y. Except for the first residence exclusively occupied by his parents and held by the partnership, Son Y had never owned a residence. You wish to know if Son Y could claim the HBTC in this second hypothetical situation.
Unless otherwise indicated, all legislative references herein are to the provisions of the Income Tax Act (the "Act").
The situations you described in your letter appear to relate to actual situations 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 involving specific taxpayers otherwise than in the form of an advance income tax ruling. If your situation involves a specific taxpayer and a transaction, you should forward all relevant facts and documents 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.
The HBTC is a non-refundable tax credit, based on an amount of $5,000, that is deductible in computing an individual's tax for the taxation year in which the individual acquired a home that qualifies for the HBTC.
Under subsection 118.05(1), a qualifying home for the HBTC is a home situated in Canada that satisfies, among other things, the following conditions. First, the home must be acquired, whether jointly or otherwise, after January 27, 2009, by the individual or the individual's spouse or common-law partner and the purchaser must intend to inhabit as a principal place of residence within one year after its acquisition.
Second, the individual must not have owned another home that the individual occupied in the four calendar years before the year in which the home was acquired, nor have occupied the home of the individual’s spouse or common-law partner in the same period.
Finally, the interest or right in the home must be registered in the name of the purchaser, namely, the individual, spouse or common-law partner, as the case may be, pursuant to a land registration system.
Although a residential unit may be owned by a partnership, the partnership cannot claim the HBTC since it is not an individual for purposes of the Act.
However, we accept, under an administrative position applicable for purposes of the HBTC (similar to those taken for purposes of calculating the gain on the disposition of a principal residence and the Home Renovation Tax Credit), that a member of a partnership may be able to claim the HBTC in certain situations even though the member is not the legal purchaser of the home.
By virtue of this administrative position, a partner could be considered the acquiror of the home for purposes of the HBTC and thus claim the HBTC if the member of the partnership is an individual, the home qualifies as a principal residence as defined in section 54 to the individual, and all of the conditions for the HBTC are otherwise satisfied as if the partner had personally acquired the home. However, this administrative position will not apply where the home owned by the partnership is used in the course of carrying on a business and an amount has already been deducted in computing income from that business as capital cost allowance or expenses in respect of the home.
We are of the view that our administrative position could apply in the two hypothetical situations you have described to us provided that all of the above conditions and restrictions were satisfied.
Best regards,
Randy Hewlett
Manager
for the Director
Ontario Corporate Tax Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch.