Messing with the New Housing Rebate Unwise

A decision released recently from the Tax Court of Canada will be of interest to those seeking to apply for the new housing rebate for a principal residence. Wong v. The Queen, 2013 TCC 23 featured an interesting analysis of subsection 254(2)(b) of the Income Tax Act (the Act) as well as actions from the appellants that is worthy of note.

In 2009, Mr. and Mrs. Wong purchased a strata property in Vancouver for their son who lived and attended school in the United States, possibly with the intention that he would live there if and when he got a job in Vancouver, following his post-graduate studies concluding in 2013. Throughout the period in question, Mr. and Mrs. Wong owned a 2200 square foot home in West Vancouver. Nevertheless, they felt as though they were entitled to the new housing rebate in question, worth $22,982.71.

The relevant parts of paragraph 254(2)(b) of the Act read:

            (2) New housing rebate – Where
                  …
            (b) at the time the particular individual becomes liable or assumes
            liability under an agreement of purchase and sale of the complex
            or unit entered into between the builder and the particular
            individual, the particular individual is acquiring the complex or
            unit for use as the primary place of residence of the particular
            individual or a relation of the particular individual,
            ...the Minister shall, ... pay a rebate ... .

When the Canada Revenue Agency (CRA) initially refused the Wong’s rebate on the basis that the property was not their principal residence, the Wong’s subsequently redirected their mail to that address and purported to use the property as such. Not only did Justice Paris not believe this claim, calling their assertions “extremely unlikely” and “implausible”, but stated that, in the circumstances, it was their intention at the time of contracting in 2009 regarding the use of the property which was determinative.

Those intrigued by the new housing rebate should keep this decision in mind. It must be the intention of the purchaser to use the property as his/her principal residence at the time of contracting in order to be entitled to a rebate under subsection 254(2)(b); attempts at qualifying for the rebate subsequent to the contract in the manner endeavoured by the Wong’s will be futile.

Greer Jacks is updating jurisprudence in EverGreen Explanatory Notes, an online research library of assistance to tax and financial professionals in working with their clients.

Source: http://decision.tcc-cci.gc.ca/en/2013/2013tcc23/2013tcc23.html