Client Assistance Directorate Financial Industries Division Mrs. Pauline McNally, Director
Attention: Ms Jennifer Loome
CAD Service Monitoring
Home Buyers Plan
This is in reply to your facsimile transmission of June 28, 1993, in which you request an answer to a question concerning the above-noted subject posed by the Toronto District Office. The question and our answer follow.
QUESTION
It has come to our attention as a result of a query from Consumer and Corporate Affairs that there may be a problem with clients who have borrowed from their RRSP to acquire a house (Homebuyers). In the event of a bankruptcy for those who elect to payback over the 15 years, what happens to the payback?
ANSWER
Technically speaking, the withdrawal from a RRSP is not a borrowing since there is no entity to which the client owes monies. Under the Home Buyers' Plan a client may withdraw funds from any RRSP on a tax-free basis. The client then has an option to either repay the minimum amount in each of the fifteen years to any RRSP('s) or be subject to an income inclusion of the minimum amount in each of the fifteen years. The tax liability arising from the income inclusion would be unaffected by a person's bankruptcy except to the extent that an income tax liability arising from any income inclusion is affected by bankruptcy.
Please note that we have had a similar enquiry from the Thunder Bay District Office (copy enclosed) and attached is a copy of our reply.
for DirectorFinancial Industries DivisionRulings Directorate