CRA indicates that it will continue on a discretionary basis to accept revisions to prior years’ CCA claims for nil-income years
The taxpayer in St. Benedict was unsuccessful in trying to effectively regenerate non-capital losses that had expired by reversing CCA claims so as to reduce those losses to nil, and then claiming a terminal loss on its subsequent disposition of its depreciable property (a building) as a result of the resulting increased UCC balance. Webb JA found that the “administrative practice [in IC 84-1, para. 10] is not binding on this Court” and that the taxpayer had no ability to change its choice of having claimed CCA for the earlier years.
Could a taxpayer who wished to refresh losses that were about to expire, reduce previous CCA claims to reduce the losses for those years (Situation 1), or could a taxpayer who did not claim CCA for loss years now make CCA claims for those years in order to increase losses for carry forward to offset trading profits that it was going to realize (Situation 2)?
CRA indicated that its position regarding the application of IC 84-1, para. 10 so far remains unchanged, but that it will exercise discretion in determining whether to allow a taxpayer's request to revise CCA claims for prior years and will consider “whether granting the request would produce an inappropriate result.” Regarding revisions for loss years, relevant circumstances could include “whether the loss has expired, whether the loss has been applied to other years, whether the revision would result in a change in the tax assessment for the year or any other year, and whether a Notice of Determination has been issued in respect of the loss.” “Since each decision is based on the facts and circumstances of each case,” it declined to comment on the two Situations presented.