28 February 1991 External T.I. 910190 F - Nil Assessments

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: NIL ASSESSMENTS

(Your file HAV 8621-4 & HAV 4568-1

This is in reply to your memorandum dated January 14, 1991 in which you requested our comments on the applicability of subsection 152 (4) of the Income Tax Act (the "Act") to nil assessments.

Your memorandum details a specific case in which a taxpayer's 1986 return is now statute barred pursuant to subsection 152(4) of the Act.  Audit has reviewed the taxpayer's 1986 return in which a non-capital loss was filed and has ascertained a loss in an amount other than that reported by the taxpayer.  Audit has requested that an Notice of Reassessment be issued in order to reflect the change in the taxpayer's 1986 loss.

It is your view that a Notice of Reassessment to revise the losses cannot be made by reason of the time limits for reassessments contained in subsection 152 (4) of the Act.

Our Comments

We concur that a notification that no tax is payable (also known as nil assessment) does constitute an assessment to identify the date from which the statute of limitation for reassessment begins.  This is consistent with subsection 152(4), Information Circular IC 75-7R3 (paragraph (1)) and TOM 13(152)6 (paragraphs (1) and (2)).

Although nil assessments are not assessments when determining whether they could be objected or appealed pursuant to sections 165 and 169, since the right of appeal must be with respect to a tax liability, they are assessments with respect to the applicability of subsection 152 (4).

When the Minister ascertains a loss that differs from the loss reported by the taxpayer, the Departmental policy and procedure as stated in TOM 13(152)1.2 (paragraph 1) is as follows:

"Changes to reported losses which are made as a result of an Audit or other investigative action, will require a reassessment be issued with an accompanying T7W-C advising the taxpayer of the change.  A "nil" assessment may be issued even though the year may be statute barred provided the previous assessment or re-assessment was also nil."

In addition to providing an explanation of the changes, the T7W-C should contain the following statement:

"Subsection 152(1.1) of the income Tax Act provides that upon request from you, the Minister shall make a determination in respect of the above changed loss(es) and shall issue a Notice of Determination."

Although the original notice of "nil" assessment is now statute barred, this has no relevance where the Department has revised the loss as long as it does not create taxes payable so that a notice of assessments required.

We trust our comments will be of assistance to you.

B.W. DathDirectorBusiness and General DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch