St. Benedict Catholic Secondary School Trust - Tax Court of Canada finds that CCA claims could not be subsequently reversed to refresh losses

The taxpayer, over the course of its 1997 to 2003 taxation years, claimed capital cost allowance and generated non-capital losses. When CRA denied the carryforward of these losses to the taxpayer’s 2014 to 2016 taxation years (they had expired), the taxpayer claimed that it incurred a terminal loss in 2017 that could be carried back to those years. This terminal loss was computed by reversing a portion of CCA claims it had made in its 1997 through 2003 taxation years, and adding these amounts to the undepreciated capital cost of the property it had disposed of in 2017.

Hogan J found that this approach of subsequently changing CCA claims did not sit comfortably with the literal wording of the UCC definition (which refers to “the total depreciation allowed to the taxpayer… before that time”) and was “not the result that Parliament intended,” as to which he further stated:

Under the Appellant’s theory, a taxpayer could claim the maximum amount of all discretionary deductions that are calculated on a pool basis each year to maximize the amount of losses available for carry-forward. If the carry-over period expires, a taxpayer could unilaterally pick and choose which discretionary deductions would be adjusted downward to avoid the impact of this rule. … This result would be extremely difficult for the Canada Revenue Agency to audit. As a matter of effective tax administration of our self-assessment system, I have difficulty imagining that Parliament intended such a result.

Neal Armstrong. Summary of St. Benedict Catholic Secondary School Trust v. The Queen, 2020 TCC 109 under s. 13(21) - UCC – E.