17 April 2018 Internal T.I. 2017-0734751I7 - 152(1.4) - Statute barred partnership return

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: Whether the Minister may make a determination in respect of a partnership information return for a taxation year that is beyond the limitation period provided by subsection 152(1.4) of the Income Tax Act (the “Act”), where no determination has been made prior to this period.

Position: No, unless one of the exceptions in subsection 152(4) applies.

Reasons: Subsection 152(1.4) provides the timeframe the Minister has the authority to make a determination of a partnership return of income. In a situation where the partnership return of income has been filed, and no determination has been made within the three year period provided by subsection 152(1.4), the Minister may make a determination beyond this period only if a waiver has been filed, or one of the exceptions in 152(4) applies.

									April 17, 2018

Large Business Audit						HEADQUARTERS
International and Large Business Directorate		Income Tax Rulings
International, Large Business and				  Directorate
  Investigations Branch					G. Godson 

Attention: Holly Carswell					2017-073475

Subsection 152(1.4) – determination of a partnership return

We are writing in reply to your enquiry of November 30, 2017, requesting our views on whether the Minister may make a determination in respect of a partnership information return for a fiscal year beyond the limitation period provided by subsection 152(1.4) of the Income Tax Act (the “Act”) where no determination has been made prior to the end of this period.

In the example provided in the inquiry, the partnership filed the information return (T5013) within the timeframe required by subsection 229(5) of the Income Tax Regulations (the “Regulations”). The Minister did not make a determination or issue a Notice of Determination to the partnership within the period required by subsection 152(1.4) of the Act.

You have also requested our comments on the implications to the members of the partnership if no determination is made under subsection 152(1.4) of the Act.

Our comments

A partnership is required to file an information return pursuant to section 229 of the Regulations. Pursuant to subsection 152(1.4), the Minister may determine any income or loss of a partnership for a fiscal period within three years after the later of the day on which an information return in respect of the partnership for the fiscal period is required to be filed and the day on which the return is actually filed. The Minister also has the authority to determine any deduction, amount or matter in respect of the partnership that is relevant in determining the tax liability of, and various amounts payable by, or refundable to, the members of the partnership under the Act for any taxation year.

Subsection 152(1.2) of the Act provides, in part, that the provisions in Divisions I and J, as they relate to assessments, apply to determinations and redeterminations made under Division I, with such modifications as the circumstances require, which includes subsection 152(1.4). In that regard, subsection 152(1.2) would provide modifications to subsections 152(3.1) and (4) in relation to subsection 152(1.4) determinations.

In situations where the partnership return has been filed and the Minister has not made a determination within the timeframe provided by subsection 152(1.4), a determination can only be made if one of the exceptions in 152(4) is applicable. In that regard, if a waiver is filed under subparagraph 152(4)(a)(ii) within the three-year period provided by subsection 152(1.4), the period within which the Minister may make a determination may be extended.

You have also requested our comments on the impact on the members of a partnership in a situation where no determination is made of the partnership, and the period in 152(1.4) of the Act has expired.

In our view, as noted in our document 2005-011196, the Minister may reassess a partner’s return of income without making a determination in respect of the partnership under 152(1.4) of the Act provided the partner’s taxation year is not statute-barred.

For your information, unless exempted, a copy of this memorandum will be severed using the Access to Information Act criteria and placed in the Canada Revenue Agency’s electronic library. A severed copy will also be distributed to the commercial tax publishers, following a 90-day waiting period (unless advised otherwise), for inclusion in their databases. The severing process will remove all material that is not subject to disclosure, including information that could disclose the identity of the taxpayer. Should the taxpayer request a copy of this memorandum, they may request a severed copy using the Privacy Act criteria, which does not remove taxpayer identity. Requests for this version should be e-mailed to: ITRACCESSG@cra-arc.gc.ca.

We trust these comments will be of assistance.

Terry Young, CPA, CA
Manager, Administrative Law Section
International Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch