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 manner of filing a paragraph 98(5)(c) election and can it be filed late?
Position: The 98(5)(c) election should be filed with the tax return for the year in which the proprietor receives property from a partnership. A late-filed notification can only be filed late at the discretion of the TSO.
Reasons: Consistent with CRA position and jurisprudence concerning filing requirement for similar notifications.
XXXXXXXXXX
2012-045241
J. Gibbons, CGA
September 20, 2012
Dear XXXXXXXXXX:
Re: Filing a designation pursuant to paragraph 98(5)(c)
This is in reply to your email dated June 19, 2012, concerning the requirements for filing a designation under paragraph 98(5)(c) of the Income Tax Act (the “Act”).
In particular, you have asked for our views regarding the manner of filing a designation under paragraph 98(5)(c) of the Act, including whether there is a prescribed form and whether the designation can be filed late. Under this provision, the “proprietor,” which is the term used in the preamble of subsection 98(5) of the Act to describe the former member of the partnership who carries on alone the business that was the business of the partnership (hereinafter referred to as the “continuing business”), may, to the extent described in paragraph 98(5)(c) of the Act, designate an amount in respect of partnership property received by that proprietor.
Our comments
Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings, dated May 17, 2002. Also, where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Services Office. Nonetheless, we are prepared to offer the following general comments.
In our view, a designation described under paragraph 98(5)(c) of the Act must be filed with the proprietor’s income tax return for the taxation year in which the proprietor received the partnership property. In this regard, there is no prescribed form for making such a designation.
Further, although the Act does not provide any mechanism for late-filed or amended designations under paragraph 98(5)(c) of the Act, the Canada Revenue Agency (the “CRA”) may, at its discretion, accept such designations depending on the facts of the particular situation. A request to accept a late-filed or amended election under paragraph 98(5)(c) of the Act should be made in writing to the local Tax Services Office.
We trust these comments will be of assistance.
Yours truly,
G. Moore
for Director
Business and Trusts Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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