Helping first-time home buyers

Under the federal Home Buyers’ Plan (HBP) a first-time home buyer can withdraw up to $25,000 from his or her RRSP to help fund the purchase of a first home. One of the conditions is that the individual who withdraws the funds must intend to occupy the home as a principal residence no later than one year after buying or building it. Once the home is occupied, however, there is no minimum time the owner must actually live there.

In some cases, a purchaser may not actually end up occupying the home by the end of the twelve-month period after purchase. Generally, this isn’t fatal to participation in the HBP provided, at the time of withdrawal, there was a bona fide intention to occupy the home as a principal residence no later than one year after purchase.

Perhaps not surprisingly, a person who doesn’t actually occupy the new home within the twelve-month HBP qualification deadline has the onus of proving he or she “intended” to do so but, for some unforeseen circumstances, couldn’t actually move in. It was precisely this issue that landed Michael Osei-Yaw in Tax Court in late 2009 (Osei-Yaw v The Queen, 2009 TCC 627).

In 2006 and early 2007, Osei-Yaw withdrew approximately $20,000 (the pre-2009 HBP maximum) from his RRSP under what he intended to be a tax-free qualifying HBP withdrawal. He used the money toward a down payment on a triplex rental property on Ile Perrot, Quebec, which closed in February 2007. At the time of purchase, Osei-Yaw and his wife were living in a rented home on Terrasse St-Roch in Montreal.

The issue in the case was whether, in fact, Osei-Yaw intended to occupy the house he bought in early 2007, using his RRSP proceeds, within one year.

Osei-Yaw testified he had originally intended to occupy the third floor unit – the largest of the three – but encountered two snags.

First problem: the third floor tenant had a disability and as a result needed more time to find a new apartment. Second: apparently when Osei-Yaw surprised his wife with the purchase of the new home, she stated “she had no desire to live on Ile Perrot.”

Osei-Yaw then decided he should occupy the basement apartment, which was currently being occupied by another tenant, Ms. McGregor. He testified he asked her verbally several times to leave but she wanted to delay the departure date. It was only in December 2008 that Osei-Yaw gave McGregor written notice for the termination of her lease at the end of June 2009.

In March 2009, Osei-Yaw gave notice to his own landlord that he would not be renewing his own Montreal lease, yet his wife continued living in the Terrasse St-Roch home “under some arrangement with the landlord which may or may not involve Osei-Yaw.”

In July 2009, once McGregor moved out, Osei-Yaw testified he moved into the basement apartment of the triplex while his wife continued to live in the Montreal apartment. Since Osei-Yaw works nights, before going to work he would go to the Montreal home to eat dinner and after work, return to his triplex home to sleep “since his wife would have already left for work.” He spent most weekends with his wife at the Montreal home.

The CRA called McGregor as a witness; she “categorically denied” having ever been asked to leave or that her lease was being terminated prior to the December 2008 written notice.

As it turns out, Osei-Yaw’s December 2008 notice to McGregror was issued only after he had been reassessed by the CRA on the basis the RRSP withdrawals were taxable and did not qualify as HBP withdrawals. The judge remarked Osei-Yaw’s new marital arrangement whereby he and his wife now have separate homes was certainly “possible…it…also conveniently fits the facts and desired outcome.”

As a result, the judge was not satisfied Osei-Yaw had any intention to live in the triplex within a year of his RRSP withdrawals and thus they did not qualify as HBP tax-exempt withdrawals and were fully taxable.

Jamie Golombek

Tax & Estate

Managing Director, Tax and Estate Planning, CIBC Private Wealth Team Jamie Golombek is Managing Director, Tax and Estate Planning with CIBC in Toronto. As a member of the CIBC Private Wealth team, Jamie works closely with advisors from across CIBC to support their clients and deliver integrated financial planning and strong advisory solutions. He joined the firm in 2008 after 12 years with a global investment company, where he was involved in both internal and external consulting on all areas of taxation and estate planning. Jamie has also worked for Deloitte as a tax specialist in the Toronto office, where he specialized in both personal and corporate tax planning. Jamie is quoted frequently in the national media as an expert on taxation. He writes a weekly column called “Tax Expert,” in the National Post, has appeared as a guest on BNN, CTV News, and The National, and for several years was a regular personal finance guest on The Marilyn Denis Show. He received his B.Com. from McGill University, earned his CPA designation in Ontario and qualified as a US CPA in Illinois. He has also obtained his Certified Financial Planning (CFP) and Chartered Life Underwriting (CLU) designations. In 2023, Jamie was named a CPA Ontario Fellow. The FCPA is the highest distinction that can be bestowed upon a CPA who brings distinction to themselves and to their profession through leadership and achievement in their professional, community or personal lives. Jamie is a past chair of the Investment Funds Institute of Canada’s Tax Working Group. He is also a member of CPA Ontario, the Illinois CPA Society, the Estate Planning Council of Toronto, the Canadian Tax Foundation and the Society of Trust and Estate Practitioners. For nearly two decades, Jamie taught an MBA course in Personal Finance at the Schulich School of Business at York University in Toronto.