Amenedment to correct unintended tax consequences or faulty valuations or computations
16. We will generally accept an amended election under subsection 85(7.1) if its purpose is to revise an agreed amount, and without this revision, there would be unintended tax consequences for the taxpayers involved. We will permit revisions to correct an error, omission, or oversight made at the time of the original election. However, we will not permit revisions when, in the Department's view, the main purpose of the amended election is: ...retroactive tax planning, such as taking advantage of losses or tax credits not considered when the election was originally filed. In situations where the changes are partly retroactive tax planning and partly to correct errors, we will advise you that we will only accept an amended election for the latter; ...to take advantage of amendments in the law enacted after the original election was filed... .
18. Revenue Canada will generally accept an amended election when:
- it corrects an inaccurate property valuation that gave rise to unintended tax consequences;
- it reduces the agreed amount of transferred shares to the correct cost amount when a transfer at cost was the intention, e.g., subsection 83(1) dividends were omitted when calculating their adjusted cost base;
- it corrects situations where it is clear that an amount was inserted in error, such as the transfer of depreciable property at its net book value instead of its undepreciated capital cost; and
- it corrects other situations which resulted in unintended tax consequences, e.g., the application of section 84.1, subsections 15(1), 84(1), and 85(2.1), or paragraph 85(1)(e.2), when it is clear the parties wanted the rollover without any immediate tax consequences.
Amended election not required for clerical error or automatic boot adjustment
19. The Department will correct clerical errors without requiring an amended election. We will consider transposition or typographical errors as clerical errors only if they are obvious upon our initial review of the election form. We will not consider as a clerical error a situation where the agreed amount equals the fair market value of the property at the time of transfer.
20. Paragraphs 85(1)(b), (c), (c.1), (c.2), (d), (e), (e.2), (e.3), and (e.4) automatically adjust the agreed amount of the transferred property. In such cases, you do not have to file an amended election.
