Principal Issues: [TaxInterpretations translation] Can a residence held by a partnership qualify as an "eligible dwelling" for purposes of the HRTC?
Position: Yes, if all the conditions for the HRTC are otherwise satisfied.
Reasons: Similar position for partnerships with respect to the principal residence exemption and application of the Act..
XXXXXXXXXX 2009-034972 I. Landry, M. Fisc. January 8, 2010
Dear XXXXXXXXXX,
Subject: Home Renovation Tax Credit
This is in response to your email of December 1, 2009 asking whether a residence owned by a partnership could qualify as an eligible dwelling for the purposes of the home renovation tax credit ("HRTC").
Unless otherwise indicated, all legislative references herein are to the provisions of the Income Tax Act (the "Act").
The situation you have indicated 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 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 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.
By virtue of subsection 118.04(1), an eligible dwelling includes a unit located in Canada in respect of which the following conditions must be satisfied. First, at the time of the qualifying renovation (as defined in subsection 118.04(1)), 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 unit owned by the corporation.
Second, the 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.
The eligible dwelling includes the land subjacent to the housing unit and the immediately contiguous land, but not including the portion of such land that exceeds the greater of 1/2 hectare and the portion of such land that the individual establishes is necessary for the use and enjoyment of the housing unit as a residence.
Although a housing unit or a share of the capital stock of a co-operative housing corporation may be partnership property, a partnership is not a taxpayer for purposes of the Act and therefore cannot claim the HRTC. However, a member of a partnership that has made qualifying expenditures as defined in subsection 118.04(1) may claim the HRTC, provided that the member satisfies all other requirements of the HRTC.
In particular, a member of a partnership that has incurred qualifying expenditures (as defined in subsection 118.04(1)) must be an individual in order to claim the HRTC. In addition, in order to qualify as an eligible dwelling for that partner, the housing unit will, be required to be ordinarily inhabited by the partner, by the partner's spouse or common-law partner or former spouse or common-law partner or by a child of the partner.
Best regards,
Louise J. Roy, CGA
Manager
for the interim Director
Ontario Corporate Law
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch.