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:
Where a single notice of reassessment is issued for reassessments under Parts I and I.3 of the Act, whether a reassessment under Part I would automatically result in a reassessment under Part I.3 if the amount of Part I.3 tax is restated on the notice of reassessment even though no changes have been made to the current Part I.3 reassessment.
Position:
No. It is the Department’s position that an assessment under each Part of the Act should be regarded as separate assessments notwithstanding the fact that the Department generally uses a single notice of assessment to inform a taxpayer of assessments under more than one Part of the Act. Accordingly, in the circumstances described, where a nil notice of reassessment is issued to reflect changes to the taxpayer’s non-capital loss under Part I, the current Part I.3 reassessment will not be jeopardized merely because the amount of Part I.3 tax is restated on the nil notice of reassessment.
Reasons:
Legislation, previous Departmental positions and jurisprudence.
May 28, 1998
EDMONTON TSO HEADQUARTERS
J. Leigh
Attention: Greg Wagar (613)952-1505
Large Case Files Manager
7-981166
Parts I and I.3 - Notice of Reassessment
This is in reply to your memorandum of May 1, 1998 in which you have asked for our views on whether a Part I reassessment would jeopardize the current Part I.3 reassessment if the notice of reassessment issued for Part I purposes restates the amount of Part I.3 tax even though no changes have been made to the current Part I.3 reassessment.
It is our understanding that the 1992 and 1993 capital tax returns of XXXXXXXXXX were reassessed on XXXXXXXXXX. The notice of reassessment issued for each year showed the revised Part I.3 tax. It also restated the Part I tax, which was nil for 1992 and 1993 since the corporation was in a loss position for those years. You advise that Part I adjustments have been proposed and that even after these proposed adjustments, the corporation would remain in a loss position for 1992 and 1993. Of concern to you is whether the issuance of a nil notice of reassessment for Part I purposes would result in a new notice of reassessment for Part I.3 purposes notwithstanding that the Part I.3 tax amount would not change. If that is the case, you note that the Department would have in effect canceled the XXXXXXXXXX Part I.3 reassessments and reassessed the corporation’s Part I.3 returns after their statute-barred date.
XXXXXXXXXX
The provisions of the Act require that a separate return be filed for Parts I and I.3. It is the Department’s position that an assessment under each Part of the Act should be regarded as a separate assessment notwithstanding the fact that the Department generally uses a single Notice of Assessment to inform a taxpayer of assessments under more than one Part.
In the situation described, it is our view that a notice of reassessment in respect of the revised Part I losses showing nil Part I tax and a restatement of the Part I.3 tax does not automatically result in a reassessment under Part I.3. We find support for our position in Orlando Corporation v. Her Majesty the Queen, 94 DTC 1046. In that case, the Minister issued a nil notice of reassessment dated December 10, 1990 revising the taxpayer’s non-capital loss for 1985. The taxpayer appealed the December 10, 1990 reassessment on the basis that the reassessment was made outside the “normal reassessment period” for 1985. The Tax Court dismissed the taxpayer’s appeal since no appeal can be made of a nil assessment. The Tax Court also determined that the Minister did not reassess the taxpayer for Part IV tax by simply reiterating on the December 10, 1990 notice of reassessment the amount of Part IV tax.
Even if it could be argued that the issuance of a nil notice of reassessment for Part I purposes results in a new notice of reassessment for Part I.3 purposes, we are of the view that the new Part I.3 reassessment would not be legally valid and therefore would not cancel the previous Part I.3 reassessment if the new Part I.3 reassessment is issued outside the “normal reassessment period”, subject to the provisions of paragraphs 152(4)(a) and (b) of the Act as modified by subsection 181.7(1) of the Act. Accordingly, the previous Part I.3 reassessment would continue to subsist (see Her Majesty the Queen v. Canadian Marconi Company, 91 DTC 5626 (FCA), Lornport Investments Limited v. Her Majesty the Queen, 92 DTC 6231 (FCA), and Carol Merswolke v. Her Majesty the Queen, 95 DTC 821 (TCC)).
As requested, we conferred with Robert Plourde and John Crowley of Headquarters Appeals regarding this matter. Based on the Orlando decision, they are in general agreement with our views. XXXXXXXXXX
In summary, if a nil notice of reassessment is issued in respect of the revised non-capital loss under Part I, it is our view that the XXXXXXXXXX Part I.3 reassessments will not be jeopardized merely because the amount of Part I.3 tax is restated on the nil notice of reassessment. However, we suggest that it be made clear to the corporation and on the accompanying T7W-C that the nil notice of reassessment relates to Part I and is not a reassessment under Part I.3.
For your information, a copy of this memorandum will be severed using the Access to Information Act criteria and placed in the Legislation Access Database (LAD) on the Department’s mainframe computer. A severed copy will also be distributed to the commercial tax publishers for inclusion in their databases. The severing process will remove all material that is not subject to disclosure including information that could disclose the identity of the taxpayer. Should your client request a copy of this memorandum, they can be provided with the LAD version or they may request a copy severed using the Privacy Act criteria which does not remove client identity. Requests for this latter version should be made by you to Jackie Page at (613) 957-0682. The severed copy will be sent to you for delivery to the client.
We hope that our comments are of assistance.
Manager
Financial Institutions Section
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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