2078970 Ontario – Tax Court of Canada finds that CRA cannot issue a s. 152(1.4) notice of determination denying partnership losses on the basis that the partnership did not exist
CRA determined that two limited partnerships did not exist because their partners were not carrying on business in common with a view to profit, and issued notices of determination to the partnerships under s. 152(1.4) determining that losses reported by the purported partnerships were, for this reason, nil. On a Rule 58 determination, Graham J accepted the partners’ submission that once CRA has determined that a partnership does not exist, any purported notice of determination that it thereafter issued to the partnership was invalid.
S. 152(1.8) provides that when, after a s. 152(1.4) notice of determination has been made, the Minister (or the Tax Court or above) concludes that the partnership in question did not exist, the Minister has a further year without limitation by the normal reassessment period to reassess the purported partners directly. Graham J indicated obiter that s. 152(1.8) could not be utilized if the notice of determination was invalid because the Minister had already concluded before issuing it that the partnership did not exist.