27 November 1995 External T.I. 9519775 - NOTICE OF DETERMINATION OF LOSSES

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.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues:

Can a determination of losses be requested by a taxpayer where the Department has not otherwise ascertained that the amount of the taxpayer's loss was different than that reported by the taxpayer. The reason for requesting a determination is to reduce certain permissive deductions for the year in order to increase a claim for ITC's which have otherwise expired.

Position:

No

Reasons:

The Act does not permit the Department to determine a loss where the loss is not ascertained by the Department to be different from what the taxpayer reported on his return as filed.

									951977
XXXXXXXXXX							Michael Cooke

Attention: XXXXXXXXXX

November 27, 1995

Dear Sirs:

Re: Notice of Determination of Loss

This is in reply to your letter dated July 19, 1995, wherein you requested our views as to whether it is possible to use federal investment tax credits (ITC's), once they have expired, by requesting a determination of loss for a taxation year and reducing other permissive deductions in that year to create sufficient taxable income and taxes to utilize the ITC's.

Subsection 152(1.1) of the Act provides a taxpayer with a mechanism to object to a notification that no tax was payable for a year by requesting a determination of loss(es) for that year. There is no time limit for making such a request and the request should be made in writing to the Tax Services Office where the taxpayer normally files his return.

In our response to Round Table question 27 at the 1986 Canadian Tax Foundation's annual tax conference the department stated that it will only provide a notice of determination of loss(es) where the loss(es) as reported by the taxpayer in his return of income for that year is changed by the department. As noted in paragraph 4 of Interpretation Bulletin IT-512 where this occurs the (re)assessment or notification that no tax is payable will usually be issued with an explanation of any such change(s). This policy is in accordance with subsection 152(1.1) and is not an administrative position. Accordingly, it is our view that where a taxpayer reports a loss unless the department ascertains a different amount the taxpayer will not be permitted to request a determination of loss.

Where circumstances exist such that a notice of determination of loss(es) has been issued the department will not allow any change(s) to a taxpayer's permissive deductions (or ITC's) for the year unless the time period for filing a notice of objection has not otherwise expired. However, even where a taxpayer files an objection within the required time period and requests such a change the department, while required to consider the taxpayer's request, is not required to adjust these deductions.

Notwithstanding the above, the department may consider allowing changes to permissive deductions where the change(s) is in accordance with the general administrative policies as expressed in Information Circular 84-1. While this information circular applies to all permissive deductions, including deductions for scientific research and development, it does not appear to apply to permissive credits such as ITC's. Accordingly, since your particular fact situation does not seem to be fully addressed by this information circular, any administrative policy on this matter remains the responsibility of the Audit Directorate. Therefore, we have forwarded your request on to Mr. Ed Gauthier, Acting Director General of the Audit Directorate for their consideration and response.

While we trust our comments will be of assistance to you as stated in paragraph 21 of Information Circular 70-6R2 dated September 28, 1990, the opinions expressed in this letter are not rulings and consequently are not binding on the Department.

Yours truly,

F. Lee Workman
Section Chief
Financial Institutions Section
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch

c.c.Ed Gauthier, Acting Director General

Audit Directorate (with attachments) XXXXXXXXXX