Tax Court cannot rectify error caused by misleading HBP rules
Source: Investment Executive
Author: Patricia Chisholm
The Tax Court of Canada has ruled reluctantly that a taxpayer who withdrew funds from his RRSP under the Home Buyers Plan (HBP) to help pay for a new condominium unit must include the withdrawn funds as part of his income.
Although the court agreed that the taxpayer withdrew the funds too late and was misled by a poorly drafted form, the court noted that there was nothing it could do to rectify the error.
The source of the error arose out of a situation that arises very commonly for purchasers of newly constructed condos: the date when the purchaser may take vacant possession of the property may vary by more than a month from the formal closing of the deal.
Under the HBP rules, the purchaser must withdraw the RRSP funds no more than 30 days after the “closing” of the deal; for the purposes of the Income Tax Act, “closing” is deemed to be the same as taking possession of the unit. However, the CRA form that must be filed when the funds are withdrawn from the RRSP for the HBP suggests that the pertinent date is the actual closing date when the purchaser becomes the owner.