CRA (changing its mind) will allow a s. 110.5 adjustment 3 years beyond the normal reassessment period

S. 152(4)(b)(iv) provides that the Minister may reassess three years beyond the normal reassessment period "as a consequence" of any payment of foreign income tax.  This permits a reassessment to allow a taxpayer's foreign tax credit claim.

But what if the taxpayer is asking to have its taxable income increased under s. 110.5 in order to generate a foreign tax credit?  CRA (reversing 2010-0379801I7) considers that, in this situation, "there is a causal connection between the foreign tax paid and the adjustment to claim the foreign tax credit, regardless of whether the adjustment includes an addition to income under the provisions of section 110.5."

By analogy with the CCA revision policy in IC 84-1, an assessment under s. 110.5 may be made even beyond the six-year s. 152(4)(b)(iv) period "where there is no change in the tax payable for the year."  "Tax" includes provincial taxes, so that a requested adjustment under s. 110.5 for a statute-barred year will not be permitted if it increases provincial taxes payable.  2010-0379801I7 suggests that this usually will be a problem.

Neal Armstrong.  Summary of 16 July 2013 Memorandum 2013-0481151I7 under s. 152(4)(b)(iv).