A federal judge has ruled that the Canada Revenue Agency misapplied its own rules when it penalized an Ontario couple for withdrawing retirement savings to buy their first home, a mistake that cost the pair thousands of dollars and forced them to appeal to Tax Court.Blacklock's Reporter says Justice John Sorenson found that CRA auditors misunderstood a key provision of the federal Home Buyers’ Plan, which allows Canadians to withdraw from their RRSPs without tax consequences to purchase a home, provided the funds are repaid within 15 years. The agency wrongly taxed Abhishek Soni and Reena Uppal, of Markham, Ont., on $38,479 they withdrew in 2020 for a downpayment after their home construction was delayed.“They dreamt the Canadian dream of home ownership,” wrote Sorenson. “They took the outstretched helping hand of the Home Buyers’ Plan.”.The court said CRA incorrectly applied a 12-month occupancy rule and failed to account for flexibility built into the system for new builds. “The system recognizes that buying and selling houses can sometimes be chaotic,” Sorenson noted. “Deals fall through, deals close late, and so on.”The couple eventually moved into their home in 2023 and continue to live there, facing the financial pressures many Canadians do, including rising interest rates. The judge quashed the CRA’s decision, calling the audit a flawed interpretation of the law that should never have reached court.Despite repeated calls for change, Parliament has rejected proposals to make the CRA legally responsible for its mistakes. In 2016, Conservative MP Pat Kelly pushed for a “duty of care” between the agency and taxpayers, but his motion was defeated 210 to 84.“With extraordinary powers there comes extraordinary responsibility,” Kelly said at the time. “Right now they have no legal duty of care to the taxpayer. If they’re wrong, sorry, and maybe not even a sorry.”
