21 June 1990 External T.I. 74765 F - Forward Averaging

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.

SUBJECT:  19(1)

This is in reply to your memorandum of February 26, 1990 concerning the forward averaging problem of the above taxpayer.

There are two issues arising out of the taxpayer's submission. One is a technical issue concerning the interpretation of subparagraph 152(4)(a)(ii) of the Act and the other is a policy issue regarding the acceptance of a late-filed election made pursuant to subsection 110.4(2) of the Act.

The technical issue arises in connection with the attempted filing by the taxpayer of a waiver in respect of his 1985 income tax return.  In the case at hand, the taxpayer received two "notifications that no tax is payable" ("notifications") in respect of the 1985 year.  A waiver was filed within three years of the second notification but not within three years of the first.  The waiver was filed in an attempt to open the door for the Department to accept a late-filed election pursuant to subsection 110.4(2) of the Act.

In connection with the technical issue, we have been advised by the Department of Finance, Tax Policy and Legislation Branch, that the reference point in paragraph 152(4)(a) from which the waiver filing deadline is determined, is intended to be the date of issuance of either the original assessment or the original notification.

In the case of an assessment, the wording of the Act clearly supports this intention.  However, in the case of a notification, the matter is less clear.  Adopting the view that the reference point for determining the deadline in subparagraph 152(4)(a)(ii) is the date of the latest notification may be advantageous to a few taxpayers.  However, such an interpretation would have the effect of continually rejuvenating the three year limitation period for reassessing a return each time a notification is issued - a result clearly contrary to the scheme of the Act.

In our view, the interpretation suggested by counsel for    would create serious disharmony in the application of paragraph 152(4)(c) and accordingly should be rejected.

In connection with the question of whether we would accept a late-filed election under subsection 110.4(2), we consulted with Assessing and Enquiries Directorate who advised us that even if the waiver in question was valid and    1985 return was open, it is not the Department's policy to accept requests to file a late-filed election pursuant to subsection 110.4(2) of the Act.  This is dealt with in T.O.M. 19 at page 1975.(18) at paragraph (2), copy attached.  We advised Ms. Conway of your office of the Department's policy on this matter so that the taxpayer's representative could be informed.

If you have any further questions concerning this matter, please do not hesitate to contact us.

R.D. Weil for DirectorBusiness and General DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch

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