Principal Issues:
1. In the particular situations, can an individual who has been separated from the individual’s former common-law partner for one year claim the HBTC on the purchase of a home in July 2009?
2. In a situation where only one of the spouse or the common-law partner satisfies all of the conditions for the HBTC, can that individual satisfying all of the HBTC conditions claim the HBTC?
3. Can an individual claim the HBTC if the individual already owns a residence that is not the individual’s principal place of residence?
4. In particular situations, when can an individual claim the HBTC?
Position:
1. Yes, if the individual otherwise satisfies all the conditions.
2. Yes.
3. Yes.
4. At the time of acquisition.
Reasons:
1. Subparagraph 118.05(1)(a)(iii) provides that an individual's spouse or common-law partner is considered to be a spouse or common-law partner only at the time of acquisition.
2. Legislative analysis and similar position with respect to the HBP.
3. Legislative analysis and similar position with respect to the HBP.
4. Legislative analysis.
XXXXXXXXXX 2010-035707
I. Landry, M. Fisc.
May 19, 2010
XXXXXXXXXX,
Subject: First-Time Home Buyers' Tax Credit
This is in response to your email of February 10, 2010 in which you asked us, using hypothetical situations, various questions regarding the first-time home buyers' tax credit ("HBTC").
Please note that unless otherwise indicated, all legislative references herein are to the provisions of the Income Tax Act (the "Act").
The situations you indicated in your e-mail appear to be related to actual situations involving specific taxpayers. As explained in Information Circular 70-6R5, Advance Income Tax Rulings, it is not the Directorate’s practice to comment on proposed transactions involving specific taxpayers otherwise than in the form of an advance income tax ruling. If your situation involves specific taxpayers and one or more completed transactions, 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.
The HBTC is a non-refundable tax credit, based on an amount of $5,000, accorded to purchasers of a qualifying home after January 27, 2009. The HBTC legislation provides that this credit is deductible in computing an individual's tax for the taxation year in which a qualifying home is acquired.
Under subsection 118.05(1), a qualifying home for HBTC purposes is a housing unit located in Canada that was acquired, whether jointly or otherwise, after January 27, 2009, and that meets the following conditions. First, the home must be acquired by the individual, or the individual's spouse or common-law partner, and the purchaser must intend to inhabit the home as a principal place of residence not later than one year after its acquisition. In addition, the individual must not have owned another home that was occupied by the individual in the four calendar years before the year in which the home was acquired, nor must the individual have lived in the home of the individual's spouse or common-law partner in the four calendar years before the year in which the home was acquired. The interest or right in the home must also be registered in the name of the purchaser, i.e., the individual or the individual's spouse or common-law partner, as the case may be, in accordance with the land registration system.
For reasons of convenience, we have reproduced each of the questions submitted, and commented on them in turn.
Question 1
a) You are asked whether an individual could claim the HBTC in respect of a home the individual bought in July 2009 and that has been the individual’s principal place of residence since that date if:
i) until July 2008, and for several years, the individual had lived with the individual’s common-law partner in a home owned exclusively by the common-law partner;
ii) until that date, that residence had been their principal place of residence;
iii) in July 2008, they had separated; and
iv) following that separation, from July 2008 to July 2009 (the date of purchase of the individual's home), the individual rented a unit in which the individual lived alone and which was the individual’s principal place of residence.
Comments
Subparagraph 118.05(1)(a)(iii) provides, inter alia, that the individual's spouse or common-law partner must not have owned, jointly or otherwise, in the period of occupation, a home that the individual occupied during their marriage or common-law partnership. In applying this subparagraph, an individual's common-law partner is taken into account only at the time the home is acquired.
Since, in the particular hypothetical situation, the individual no longer had (since July 2008) a common-law partner at the time the home was acquired, the home acquired in July 2009 could, if all other conditions were otherwise satisfied, qualify as a qualifying home within the meaning of subsection 118.05(1).
(b) If, instead, the individual bought the individual’s home in July 2009 in co-ownership with a new spouse, this home was their principal place of residence, the new spouse had never owned another home, and on December 31, 2009, they were not considered to be common-law partners for tax purposes, you asked whether the spouse could claim the HBTC.
Comments
The spouse could claim the HBTC as long as the spouse satisfies all the conditions of application. However, where more than one individual is entitled to claim the HBTC in respect of a qualifying home, the HBTC may in that case be claimed by, or shared between, any of the individuals. However, the total amount of the credit claimed by all individuals combined cannot exceed $750.
Question 2
You asked whether, in a situation where only one of the spouses or common-law partners satisfies all of the conditions for the HBTC, only the one who satisfies them could claim the HBTC.
Comment
In a situation where only one of the spouses or common-law partners satisfies all the conditions for claiming the HBTC, only the qualifying spouse or common-law partner could claim the HBTC, regardless of the fact that the other spouse or common-law partner could not.
Question 3
You asked whether the HBTC could be claimed for the purchase by an individual of a home in July 2009 that would be the individual’s principal place of residence where the individual already owns a home that is not the individual’s principal place of residence.
Comment
We are generally of the view that where a home is not occupied as a principal place of residence, which is a question of fact, ownership of that residence does not disqualify the individual from the HBTC. The individual would therefore be able to claim the HBTC in this situation if all the conditions for the application of the HBTC are otherwise satisfied.
Question 4
(a) You asked us whether an individual who otherwise satisfies all the conditions for claiming the HBTC would be able to claim the HBTC if the individual acquired a residence on December 15, 2009, but did not live in it before February 1, 2010.
(b) You asked us whether an individual who otherwise satisfies all the conditions for claiming the HBTC would be able to claim the HBTC if the individual acquired a residence on December 15, 2009, incurred renovation expenses between December 15, 2009 and January 31, 2010, and moved in only on February 1, 2010.
(c) Finally, you asked us if there can be a gap between the date the individual bought the home and the time the home becomes the individual’s principal place of residence.
Comment
The HBTC legislation provides that the credit is deductible in computing an individual's tax for the taxation year in which a home qualifying for the HBTC is acquired.
The taxation year in which the credit is deductible in calculating an individual's tax depends on the date of acquisition of the home, which generally corresponds to the date of purchase of the residence. Renovating a home after its acquisition or moving into it within a few weeks of its acquisition generally does not change the time at which the HBTC can be deducted in computing an individual's tax.
There could be a delay between the date of acquisition and the date the residence becomes the individual's principal place of residence. The HBTC legislation only requires that the individual's intention is to make it the individual’s principal place of residence no later than one year after the acquisition.
Best regards,
Randy Hewlett
Manager
for the Director
Ontario Corporate Tax Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch.