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.
May 28, 1998
WINNIPEG TSO HEADQUARTERS
Client Services B. Kerr
(613) 957-2139
Attention: Debbie Anderson
971141
Fiscal Year End - Retroactive Changes
This is in response to your letter of April 23, 1997, concerning retroactive changes to fiscal periods. We apologize for the delay in responding which resulted from our need to consult with the Audit Directorate, Legislative Policy Division and the Adjustments Section. You have referred to the alternative method election under the provisions of subsection 249.1(4) of the Act and have requested our views on the following three questions:
- Where an individual elected to maintain a non-calendar year fiscal period for a business, can they revoke the election within the time limits allowed for filing a notice of objection for the particular taxation year.
- Can an individual amend their return to change from a December 31 fiscal period to elect to maintain a non-calendar year fiscal period within the time limits allowed for filing a notice of objection.
- Where an individual did not elect to use the alternative method and did not calculate their income based on a December 31 fiscal period on filing, can they now elect to choose a non-calendar year fiscal period.
Subsection 249.1(6) of the Act allows a taxpayer that has filed an election under subsection 249.1(4) to revoke that election if certain conditions are met. Subsection 249.1(6) of the Act requires the election to revoke to be filed by the filing-due date and with the tax return for the particular taxation year. Therefore, in order to revoke the election made under subsection 249.1(4) for the 1995 taxation year, the election to revoke would have to be made by the filing due date for that year. There is no provision that allows for a retroactive, late or amended election. We consulted with the Audit Directorate since it was their recommendation to the Policy Sub-Committee that led to the addition of paragraph 600(b.1) to the Income Tax Regulations, and confirmed that administratively they would also accept a late filed election to revoke if filed by January 31, 1998.
Subsection 249.1(4) of the Act provides an exception to paragraph 249.1(1)(b) to allow certain persons to elect to maintain a non-calendar year fiscal period. This election must be filed by the filing due date and with the return for the taxation year that includes the first day of the first fiscal period of the particular business that ends after 1994. However, on October 9, 1997, paragraph 600(b.1) was added to the Income Tax Regulations to permit an individual to make a late election in respect of subsection 249.1(4) of the Act, provided the election is filed with the Minister by January 31, 1998.
We consulted with the Adjustments Section of the Assessment of Returns Directorate concerning ARD 95 - 20 which indicates that they would accept a late filed election under subsection 249.1(4) provided it was filed within the time period allowed for filing a notice of objection under subsection 165(1) of the Act. It was also their position that once a taxpayer has adopted a December 31 fiscal period, they would not be allowed to convert back to a non-calendar year fiscal period. They also advised us that the Department of Finance did not object to such an administrative position. Since Regulation 600(b.1) supersedes ARD 95-20, the Adjustments Section recently advised that they will no longer accept late elections.
In addition, we have been advised by Legislative Policy Division that in their view late elections under 249.1(4) or (6) should no longer be accepted since the deadline of
January 31, 1998 has passed.
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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