7 July 2010 Internal T.I. 2010-0364101I7 - Time lines to assess or reassess

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: Whether the CRA can reassess a corporate taxpayer for prior years for taxes that were reduced from the carryback of a non capital loss in a subsequent tax year.

Position: Tax years 2000 and 2001 are now statute barred while there remains time to reassess for the 2002 tax year.

Reasons: The passage of time.

		July 7, 2010

	Windsor TSO	 					Headquarters
	Audit Division					Income Tax Rulings Directorate
								Richard Aronoff
								613-941-7239

	Attention :	Carolyn Tavolieri
		Large Case File Manager			2010-036410

Time limits within which to assess or reassess a taxpayer

This is in response to the issues raised in John Jraige's email of April 14, 2010. His query is based on the following fact situation:

• A taxpayer, a non-Canadian controlled private corporation, reported a $XXXXXXXXXX non-capital loss for the year ending XXXXXXXXXX, 2002. Following a purely mechanical assessment of the return for that year on January 13, 2004, which was conducted on the basis of a very limited review, the loss was allowed whereupon the taxpayer elected to carry the loss back to its 2001 and 2000 tax years.
• The 2000 and 2001 tax years had initially been assessed on October 3, 2001 and September 26, 2002 respectively. The returns in respect of these years had also been assessed on a mechanical basis without any in-depth review.
• Based on a recent audit, Mr. Jraige proposes to reassess the 2002 return to reduce the amount of the loss by $XXXXXXXXXX . He would further like to reassess the 2000 and 2001 tax returns to reflect the $XXXXXXXXXX reduction in the amount of the 2002 non-capital loss that the company carried back to these tax years.

He takes the view that the reassessment period for these years would be extended past the normal reassessment period in paragraph 152(3.1)(a) by an additional three years, in this case from four years to seven, by reason of the application of subparagraphs 152(4)(b)(i) and (iii). The gist of his inquiry is whether the proposed reassessments of the 2000, 2001, and 2002 taxation years would be within the extended reassessment period.

Paragraph 152(3.1)(a) provides that, in respect of this taxpayer corporation, the clock begins to run from the earlier of the date that is the day of mailing of the notice of an original assessment for the respective year and the day of mailing of an original notification indicating that no tax is payable for the year. From the facts, we confirm the view that, provided that subparagraphs 152(4)(b)(i) and (iii) apply to extend the reassessment period and absent the conditions of paragraph 152(4)(a), the deadlines to reassess the 2000 to 2002 taxation years are as follows:

• For the 2000 taxation year: October 3, 2008
• For the 2001 taxation year: September 26, 2009
• For the 2002 taxation year: January 13, 2011

While there is still time to reassess the 2002 taxation year, the time to reassess the 2000 and 2001 taxation years has passed and those years are now statute barred for reassessment purposes.

Hopefully, these comments have provided the clarification that you were seeking.

Should you have any questions or require additional information, please do not hesitate to telephone Richard Aronoff at the number provided above.

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

cc. John Jraige
Large File Case Auditor
Windsor TSO