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.
Principal Issues: What is the CRA's policy regarding comfort letters issued by the Department of Finance?
Position: See Q. 10 of 2009 CTF Roundtable. CRA's policy is to allow a taxpayer to file their return on the basis of proposed legislation.
Reasons: Policy
XXXXXXXXXX 2009-034578
Katharine Skulski
January 20, 2010
Dear XXXXXXXXXX :
Re: Subsection 40(3.1) of the Income Tax Act (the "Act")
This is in response to your email of October 27, 2009, inquiring about the Canada Revenue Agency's (the "CRA") policy regarding the possible assessment of a deemed capital gain pursuant to subsection 40(3.1) of the Act for a partner of a full shield limited liability professional partnership or a partner of a general limited liability partnership.
You have referred to the comfort letter dated July 11, 2003, in which the Tax Policy Branch of the Department of Finance agreed to recommend to the Minister of Finance that an amendment be made to subsection 40(3.1) of the Act to provide that the adjusted cost base of a full shield professional LLP be adjusted at the end of the fiscal period of the LLP to reflect the income or loss allocations made by the LLP at that time. The proposed amendments have not been released yet.
At the 2009 Annual Canadian Tax Foundation Conference, the CRA confirmed at its Roundtable Discussion its position regarding filings based on proposed changes to law. While it is the CRA's longstanding practice to ask taxpayers to file on the basis of proposed legislation, a comfort letter is not considered proposed legislation and usually only reflects Finance's views on a particular issue affecting a specific taxpayer. Under the self-assessment system of filing tax returns, taxpayers may decide to file based on a comfort letter. Generally the CRA will not reassess taxpayers who have filed on the basis of and in conformity with a comfort letter.
Yours truly,
G. Moore
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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