3 February 2010 External T.I. 2009-0342721E5 - HRTC - Stratas - Change in ownership

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Principal Issues: 1. Who can claim a share of the eligible expenditures incurred for common areas where there is a change in ownership of the strata unit during the HRTC eligibility period - the previous owner or the current owner?

2. How will the eligible expenditures be allocated between the previous owner and the current owner of the unit, if a unit changes its owners during the HRTC eligibility period?

Position: 1. Both, the previous owner who sold the unit and the current owner who bought the unit, may claim their share of the qualifying expenditures, providing all of the HRTC requirements are met.

2. Generally, the qualifying expenditures incurred for common areas are allocated to strata unit owners based on the governing documents or special resolutions of the strata corporation. However, the total amount allocated to the different owners of a unit should not exceed the amount of qualifying expenditures that would otherwise be allocated had there been one owner.

XXXXXXXXXX 							2009-034272
A. Mahendran
February 3, 2010 

Dear XXXXXXXXXX :

We are responding to your correspondence, which we received on September 29, 2009, regarding the new home renovation tax credit (HRTC). In particular, you would like to know who can claim a strata unit's share of the eligible expenditures incurred for common areas if the unit is sold part-way through the year.

Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings, dated May 17, 2002. Where the particular transactions are completed, the inquiry should be addressed to the relevant tax services office. However, we offer the following general comments regarding the HRTC.

The legislation regarding the new HRTC has been enacted and is contained in section 118.04 of the Income Tax Act (ITA). The HRTC provides individuals with a temporary 15% non-refundable income tax credit on eligible home renovation expenditures for services received or goods acquired, after January 27, 2009, and before February 1, 2010. However, expenditures for services received or goods acquired under agreements entered into before January 28, 2009, do not qualify for the HRTC. Taxpayers can claim this credit for the 2009 tax year on qualifying expenditures exceeding $1,000, but not more than $10,000, which will result in a non-refundable tax credit of up to $1,350.

Under section 118.04, expenditures qualify for the HRTC if they are directly attributable to a renovation or an alteration of an eligible dwelling, including land that forms part of the eligible dwelling, and if the renovation or alteration is of an enduring nature and is integral to the eligible dwelling. Such expenditures include the cost of labour and professional services, building materials, fixtures, equipment rentals, and permits.

An eligible dwelling is a housing unit located in Canada that is owned by the individual, at the time of the renovation, and ordinarily inhabited by the individual, his or her current or former spouse or current or former common-law partner, or his or her children at any time after January 27, 2009, and before February 1, 2010. Therefore, any housing unit that an individual owns and uses personally, including a home and a cottage, qualifies for the HRTC.

In the case of stratas, the HRTC can be claimed for qualifying expenditures incurred to renovate the strata unit that is the individual's eligible dwelling as well as for the individual owner's share of qualifying expenditures incurred by the strata council. Section 118.04 of the ITA does not prescribe how the individual owner's share is determined. Generally, the qualifying expenditures incurred for common areas by the strata council are allocated to unit owners based on the governing documents or special resolutions of the strata council. Where there is a change in ownership of a unit, the purchase and sale agreement may have clauses regarding liability for common area expenses. Furthermore, where a unit changes owners during the year, the strata council should notify each owner of their share of any qualifying expenditures; however, the total amount allocated to the different owners of a unit should not exceed the amount that would otherwise be allocated had the unit been owned by only one owner during the year.

You can find more information on the HRTC on the Canada Revenue Agency's Web site at www.cra.gc.ca/hrtc.

We trust that the information provided is helpful.

Yours truly,

Nerill Thomas-Wilkinson
Acting Manager
for Acting Director
Ontario Corporate Tax Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch