19 January 2011 Internal T.I. 2010-0387441I7 - Reassessment Period for Loss Carry Backs

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.

Principal Issues: What is the reassessment period for applying loss carry backs in respect of a public corporation?

Position: Seven years

Reasons: The combined effect of subparagraph 152(4)(b)(i) and paragraph 152(6)(c).

January 19, 2011

Toronto Centre Tax Services Office				HEADQUARTERS
									Income Tax Rulings
										Directorate
									Bing Zhang
Attention:  Steve Borg, Large File Case Manager		(613) 957-2095
		Audit Division
									2010-038744

Reassessment Period for Loss Carry Backs

This is in response to your email of November 16, 2010 regarding the reassessment period for the application of the loss carry back provisions of section 111 of the Income Tax Act (the "Act").

A subsidiary of a public corporation was assessed with respect to the 2006, 2007, and 2009 taxation years on May 10, 2007, September 16, 2008 and May 11, 2010, respectively. In 2009, the corporation reported non-capital losses, which it requests to be carried back to the 2006 and 2007 taxation years. You are seeking confirmation that those taxation years are not statute barred.

Under subsection 152(4) of the Act the Minister may at any time make an assessment, reassessment or additional assessment of tax for a taxation year. Ordinarily the reassessment must be done within the normal reassessment period. The definition of a normal reassessment period is contained in subsection 152(3.1) of the Act. The period runs from the earlier of the day of mailing of an original assessment for the year and the day of mailing of an original notification that no tax is payable for the year. Where the taxpayer is a mutual fund trust or a corporation, other than a Canadian-controlled private corporation, the period is four years. In any other case, the period is three years.

The definition of a Canadian-controlled private corporation is provided in subsection 125(7) of the Act, and excludes a corporation controlled by a public corporation. A subsidiary controlled corporation is defined in subsection 248(1) to mean a corporation where more than 50% of its issued share capital (having full voting rights under all circumstances) belongs to the corporation to which it is a subsidiary.

Assuming that the subsidiary of the public corporation in this instance is a subsidiary controlled corporation, its normal reassessment period would be governed by the provisions of paragraph 152(3.1)(a) of the Act. That being the case, the reassessment period would be four years.

However, paragraph 152(4)(b) extends the normal reassessment period for an additional three years in certain cases. For example, subparagraph 152(4)(b)(i) enables a reassessment in respect of 152(6)(c), which deals with loss carry backs under section 111. In the instant case, the reassessment period would be seven years. Accordingly the reassessment period for the 2006 taxation year will expire on May 10, 2014, whereas, the reassessment period for the 2007 taxation year will expire on September 16, 2015.

Should you need clarification or additional information on the foregoing, please do not hesitate to contact Bing Zhang at the number provided above.

Yours truly,

B.J. Skulski
Manager
Insolvency and Administrative Law Section
Ontario Corporate Tax Division
Income Tax Rulings Directorate