During her marriage, a spouse inhabited a home wholly owned by her husband. He passed away and the house became an asset of the estate. Subsequent to her husband’s passing, the spouse purchased a new property. She had not re-married or entered into any common law partnership.
Is the spouse (taxpayer) eligible for the home buyers plan and the first-time home buyers’ tax credit?
In a recent technical interpretation (2019-0811881C6), the Canada Revenue Agency (CRA) was asked to opine on this scenario.
The Home Buyers’ Plan (HBP) is a program that allows an individual to withdraw funds from their Registered Retirement Savings Plans (RRSPs) to buy or build a home for themselves. The HBP allows the individual to pay back the withdrawn funds within a 15-year period. To be eligible for the plan, the individual must be considered a first-time home buyer, as defined in the relevant sections of the Income Tax Act (ITA). According to the ITA, to be eligible for the plan, the individual could not have an owner-occupied home in the period that began at the beginning of the fourth preceding calendar year that ended before the time of the withdrawal, and that ended on the 31st day before the time of the withdrawal.
In its interpretation, the CRA determined that the relationship created by marriage ceased at the time of death. Thus, following the husband’s death, the taxpayer no longer had a spouse. Further, since it was her late husband who was the sole owner of the home before his death, and thereafter it was owned by his estate, the taxpayer never owned the home she occupied. In addition, since she did not have a spouse or common-law partner at the time of the planned purchase and co-incident withdrawal from her RRSP, she did not occupy any other property owned by her spouse in the previous four-year period.
As a result, it appeared the taxpayer met all the eligibility requirements of the home buyers plan and would have appeared to qualify also for the first-time home buyers’ tax credit if all other eligibility requirements associated with the definition of a qualifying home were met.
It is worth noting that if the matrimonial home was jointly owned (legally or beneficially), the taxpayer would not likely be eligible for the HBP or the first-time home buyers' tax credit.
As featured on All About Estates Blog where Baker Tilly WM Partner, Steven Frye, is a regular contributor.
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