11 February 1998 Internal T.I. 9731877 - FISCAL PERIOD CHANGE

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: change in fiscal period

Position: at ministers discretion

Reasons: law

									February 11, 1998

	Burnaby-Fraser Tax Services Office		Partnerships Section
	Business Window					S. Tevlin
(613) 957-2093
	Attention:  Valerie Dionne
									7-973187

Section 249.1 of the Income Tax Act

We are writing in response to your memorandum dated November 27, 1997 wherein you requested our comments regarding the application of section 249.1 of the Act as it pertains to a request for a change in a fiscal period.

The definition of fiscal period in subparagraph 249.1(1)(b)(i) provides that where certain conditions exist, a fiscal period of a business may not end after the end of the calendar year in which the period began unless the business is not carried on in Canada. This subparagraph does not, however, apply to a business where the business is carried on by an individual who elects to have the "alternative fiscal-period method" in subsection 249.1(4) apply. These rules apply to fiscal periods that begin after 1994.

Subsection 249.1(7) of the Act provides that no change in the time at which a fiscal period ends may be made without the concurrence of the Minister.

If the Minister concurs in a request for a change in the fiscal period of a business, any subsequent fiscal period will remain subject to the rules in subsection 249.1(1) of the Act unless that fiscal period is exempted from such rules because of an election filed under subsection 249.1(4) for the taxation year in which the business began or 1995 (whichever is later).

If the taxpayer had elected pursuant to subsection 249.1(4) to use the alternative method a Tax Services Office should, subject to TSO guidelines, be able to consider the request for a change in the fiscal period. However, we caution that the request for a change in year end may create a deferral of income, resulting from the application of sections 34.1 and 34.2 of the Act. In the absence of a valid non-tax reason for the change, such a deferral would be unacceptable in policy terms and a request to change year ends solely for that purpose should be denied.

Where the taxpayer had not made a subsection 249.1(4) election, the taxpayer pursuant to paragraph 249.1(1)(b) would currently have a December 31 year-end for income tax purposes. If that taxpayer then requests that a subsequent fiscal period end on an earlier day in that subsequent year, the Minister may concur in that request, but the business will still have a fiscal period ending on December 31, for purposes of the Act, because of paragraph 249.1(1)(b).

Interpretation Bulletin IT-179R is currently under review. The completion date is indeterminable at this time.

Any questions that you may have regarding requests to revoke a subsection 249.1(4) election should be referred to Mr. Ron Boicey in the Audit Directorate at (613) 957-8853.

We trust our comments will be of assistance to you.

for Director
Resources, Partnerships and Trusts Division
Income Tax Rulings and Interpretations Directorate
Policy and Legislation Branch