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: Whether a notice of determination can be issued to a partnership where such determination is statute-barred, and where the partnership has never filed information returns.
Position: Nothing prevents the Minister from issuing a determination or requires the Minister to issue one. However, in this case, given that the amounts are immaterial, it would be reasonable to decline the invitation to make the determination.
Reasons: The partnership determination rules are designed to give the Minister, and not the taxpayers, flexibility in auditing partnerships.
March 3, 2010
Calgary Tax Services HEADQUARTERS
Audit Division Income Tax Rulings
Directorate
Attention: Rob Kisinger Lindsay Frank
Manager, Large Files (613) 948 2227
2010-035473
Determination of Partnerships
This is in reply to your email of January 18, 2010, concerning the application of subsection 152(1.4) of the Income Tax Act.
ABC was audited. ABC is a 98% or 99% partner of a number of in-house partnerships, each of which has one or two related corporations (Subco) as a 1% partner. The partnerships did not file returns as contemplated in section 229 of the Income Tax Regulations ("Regulations"). One such partnership was included in the audit and errors were identified. A reassessment was made to the return of ABC as a result, but not (because of materiality) to the returns of the two Subcos. ABC has requested that the returns of the two Subcos be reassessed to reflect their 1% share of the reassessment. One of those returns is now beyond the normal reassessment period.
Subsection 152(1.4) permits the Minister to determine any income or loss of a partnership for a fiscal period. The determination must be made within 3 years after the later of the day on which an information return for the fiscal period is required to be filed under section 229 of the Regulations, or would be so required but for a waiver under subsection 220(2.1), and the day on which the return is actually filed. Subsection 152(1.4) also authorises the Minister to determine any deduction, amount, or matter relating to the partnership considered relevant in assessing the members of the partnership.
These partnership determination rules were introduced to give the Minister flexibility in managing the audits of widely-held partnerships, typically tax shelters with many members. Prior to their introduction, the Minister was required to reassess, and to respect the normal reassessment period of, each partner. The determination is available at the option of the Minister, who can decide not to use it. The rules were not enacted to provide more flexibility for taxpayers.
Nothing prevents the Minister from issuing a determination of an amount of the partnership in your situation, but nothing requires it, either. Since you had already made the decision that the amounts were immaterial, it would be reasonable to decline the taxpayer's invitation to make the determination.
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Should you need clarification or further information, please do not hesitate to contact Lindsay Frank at the number provided above.
B.J. Skulski
Manager
Insolvency and Administrative Law Section
Ontario Tax Division
Income Tax Rulings Directorate
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