Requests to CRA for fiscal year end changes must “be prompted solely by sound business reasons”

CRA is now stating that "requests for changes in fiscal periods … [must] be demonstrated to be prompted solely by sound business reasons other than obtaining tax benefits."  Accordingly, if the reason for wanting a partnership fiscal year to end immediately before the sale by a partner of his partnership interest is ensuring that he can be allocated his share of a partnership-level loss incurred up to the time of sale (but which might be offset by partnership income realized later in the year), the request likely will be denied.

The presence of lower-tier partnerships would be a further reason for denial, as granting the request would result "in the fiscal period ends of the partnerships becoming misaligned [which] would be contrary to the underlying rationale of paragraph 249.1(1)(c) [respecting multi-tier partnerships]."

Neal Armstrong.  Summary of 9 December 2014 T.I. 2014-0529311E5 under s. 249.1(7).