Toronto, ON – The Tax Court of Canada has ruled in favour of a Toronto couple in a dispute with the Canada Revenue Agency (CRA) over whether their 2022 withdrawals from Registered Retirement Savings Plans (RRSPs) qualified under the federal Home Buyers’ Plan (HBP).
The Home Buyers’ Plan (HBP) is a federal program that lets eligible Canadians withdraw up to $35,000 from their Registered Retirement Savings Plans (RRSPs) to buy or build a qualifying home without paying tax on the withdrawal. The money must be paid back into the RRSP over a set repayment period.
Usually, all withdrawals must be made in the same calendar year. However, section 146.01(2)(d) of the Income Tax Act includes a special “deeming rule” that treats certain later withdrawals as if they happened in the previous year. This allows withdrawals made in January, or later, if the Minister agrees, to still qualify under the HBP, even though they occur outside the normal window. The rule is meant to accommodate situations like new home builds or delayed closings, where timing can make it hard to complete all withdrawals in a single year.
In the case of Uppal v. The King, 2025 TCC 103 (CanLII), Justice John A. Sorensen heard the appeals of Reena Uppal and Abhishek Soni together, as both involved the same facts and legal issues. The couple, who work in the service industry, purchased a pre-construction home in December 2020 and made their first HBP withdrawals in 2021 to help fund the purchase. Delays in construction meant they did not move into the home until 2023.
In 2022, Soni withdrew $17,686 from his RRSP and Uppal withdrew $20,793. The CRA assessed both amounts as taxable income, arguing they fell outside the statutory window and that the deeming rule could not apply because the couple’s RRSP balances on December 31, 2021, were insufficient to cover the withdrawals. The Minister took the position that the special rule could not deem funds withdrawn from an account with no—or too little—money at year-end.
Justice Sorensen rejected that interpretation, noting there is no requirement in the law for a positive RRSP balance at year-end in order for the deeming provision to apply. He found that section 146.01(2)(d) creates a legal fiction that allows certain later withdrawals to be treated as having occurred in the previous year, regardless of the actual account balance at that time.
The Court also considered whether the Minister had found the timing of the couple’s 2022 withdrawals unacceptable under the provision. Justice Sorensen concluded that lateness was not the issue; the reassessments were based solely on the perceived insufficiency of RRSP balances at the end of 2021. The judge drew this conclusion from the pleadings, notices of confirmation, and the evidence presented.
In reaching his decision, Justice Sorensen referred to the 2007 Tax Court case of Loh v. R., which also dealt with the HBP and the deeming provision. While the facts differed, Loh underscored the importance of applying the law as written, even in situations where real estate transactions do not align neatly with the calendar year.
The appeals were allowed, and the 2022 assessments were sent back to the Minister for reconsideration and reassessment in line with the Court’s reasons. No order for costs was made.
