17 August 1993 Income Tax Severed Letter 930205A F - T2057 Elections

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.

XXXXXXXXXX

Attention:  XXXXXXXXXX

Dear Sirs:

RE:  Request for Technical Interpretation

This is in response to your letter of August 3, 1993 in which you requested our views on the following situation.

Assume an individual has transferred property to a corporation pursuant to a written agreement and that the parties have jointly filed under subsection 85(1) in respect of the transfer. Assume further that the written agreement specified an elected amount to be used in the 85(1) election but that the elected amount used on prescribed form T2057 is not in agreement with the elected amount specified in the written agreement. The elected amounts in both the written agreement and the T2057 are within limits allowed by the Act, and thus it is not obvious upon the department's initial review that an error has occurred.

Given that this error is not a clerical error that is not obvious upon initial review, what is the department's position as to a failure to file an amending election? More specifically, assuming that the transferor and transferee are willing to accept the elected amount in the originally filed T2057 (albeit not in agreement with the written contract) is the original election valid or is it considered invalid solely because the elected amount specified in the T2057 is different from that specified in the written agreement?

Our Views

Generally, provided the elected amount on form T2057 falls within the parameters set out in subsection 85(1) of the Income Tax Act, it is our view that the election would not be invalid solely because the elected amount was different than that specified in the original agreement between the parties.

There may, however, be circumstances when this general position would not be applicable and the Department would not accept an elected amount which varied from that specified in an agreement between the parties. This determination would fall within the jurisdiction of the responsible District Taxation office.

The foregoing comments are given in accordance with the practice referred to in paragraph 21 of Information Circular 70-6R2 dated September 28, 1990 and are not binding on Revenue Canada, Taxation.

Yours truly,

for DirectorReorganizations and Foreign DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch