Income Tax Severed Letters - 2008-08-15

Technical Interpretation - External

7 August 2008 External T.I. 2008-0280971E5 - Limit on interest and property tax - Vacant Land

Unedited CRA Tags
18(2)(e) 18(2)(f) 18(3)

Principal Issues: May an individual taxpayer that is subject to subsection 18(2) of the Act, by virtue of subsection 18(3), deduct interest: 1. to the extent that the assisted-entity earns gross revenue from the land in excess of its other expenses; or 2. to the extent of the base level deduction of the assisted-entity, where the assisted-entity is a corporation whose principal business is the development for sale of real property and has a base level deduction available to it?

Position: 1. No 2. No

Reasons: Pursuant to paragraphs 18(2)(e) and (f) of the Act, a taxpayer that is subject to subsection 18(2) of the Act, by virtue of subsection 18(3), may only deduct interest to the extent of the total of that taxpayer's (i.e., not the assisted-entity's) gross revenue from the land in excess of its other expenses, and in the case of a corporate taxpayer whose principal business, inter alia, is the development for sale of real property, that corporation's (i.e., not the assisted-entity's) base level deduction.

XXXXXXXXXX 2008-028097
L. Carruthers, CA
August 7, 2008

Technical Interpretation - Internal

7 August 2008 Internal T.I. 2008-0284301I7 - Normal reassessment period

Unedited CRA Tags
152(4) 152(3.1) 152(1.1)

Principal Issues: A corporate taxpayer filed a return reporting a non-capital loss for the 2003 taxation year. The loss was carried back and applied to reduce taxable income for the 2002 taxation year. The TSO is currently carrying out an audit of the 2003 taxation year and has identified several adjustments that will reduce the non-capital loss reported. However, the proposed adjustments will not result in additional taxes payable for 2003. The question asked is whether the proposed adjustments must be made prior to the expiry of the normal reassessment period.

Position: Provided that the proposed adjustments will not result in additional taxes payable for the 2003 year, the proposed adjustments can be made after the normal reassessment period.

Reasons: The legislation provides that the normal reassessment period is only relevant in the assessment of taxes, interest or penalties. In this situation, the proposed adjustments will only impact the amount of the non-capital loss reported for 2003.