27 February 2003 External T.I. 2002-0176655 - Loss Carryback and Fairness Provisions

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CCRA.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.

Principal Issues: Loss carryback and fairness provisions

Position: Subsection 152(4.2) is not applicable in this situation

Reasons: Section 111 losses are carried back 3 years only.

XXXXXXXXXX 								2002-017665
L. Majerus
(613) 946-3558
February 27, 2003

Subject: Loss Carry back

We are writing in response to your correspondence of July 17, 2002, wherein you requested our views regarding the carry back of net capital and non-capital losses. Specifically, you have enquired about the use of paragraph 152(4.2)(b) of the Income Tax Act (the "ACT") to utilize losses beyond the time limits specified in section 111 of the ACT.

Our Comments

Subsection 152(4.2) of the ACT provides the Minister with the discretion to adjust an individual's income tax return after the normal reassessment period if an application for an adjustment is made by the individual taxpayer. Specifically, paragraph 152(4.2)(b) allows the Minister to determine "a reduction of an amount payable under this Part (i.e. Part I of the ACT) by the taxpayer for that year".

The purpose of paragraph 152(4.2)(b) of the ACT is to provide both the individual taxpayer and the Minister the opportunity to adjust a statute-barred tax return where the reassessment results in the reduction of taxes payable. However, such adjustments must be in accordance with the provisions of the ACT. Therefore, net capital losses and non-capital losses may only be carried back to the three preceding taxation years in accordance with section 111 of the ACT.

We trust these comments will be of assistance.

Yours very truly,

for Director
Reorganizations and Resources Division
Income Tax Rulings Directorate
Policy and Legislation Branch