7 June 2010 External T.I. 2010-0363321E5 - Disability tax credit - reassessment of prior year

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: Can a prior year return be reassessed for the disability tax credit when the disability tax credit certificate was signed in the current year?

Position: There is no specific provision of the Act that would preclude an individual from requesting to have a prior year tax return reassessed for the DTC where the certificate was signed in one year certifying that the impairment started in an earlier year.

Reasons: Pursuant to subsection 152(4.2) CRA may reassess a tax return beyond the three year normal reassessment period to allow adjustments to prior year returns in any of the 10 calendar years before the year a request is made.

XXXXXXXXXX
									2010-036332
									P. Waugh
June 7, 2010

Dear XXXXXXXXXX :

Re: Amendment to 2007 and 2008 Tax Returns - Disability Tax Credit

I am writing in reply to your letter dated April 6, 2010 enquiring whether a taxpayer's 2007 and 2008 personal tax returns can be amended for the transfer of an eligible dependant's disability tax credit, when the Disability Tax Credit Certificate was received in 2009. You describe a situation where a taxpayer's mother has a Disability Tax Credit Certificate prepared and signed by a medical doctor, which is dated XXXXXXXXXX , 2009 and shows the date of the disability/impairment beginning in 2007.

Our comments

Written confirmation of the tax implications inherent in particular transactions may only be provided by this Directorate where the transactions are proposed and are the subject matter of an advance income tax ruling submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Ruling, dated May 17, 2002. This Information Circular and other Canada Revenue Agency ("CRA") publications can be accessed on the Internet at http://www.cra-arc.gc.ca. Where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Services Office, a list of which is available on the "Contact Us" page of the CRA website. We are, however, prepared to provide the following general comments.

Pursuant to subsection 118.3(1) of the Income Tax Act (the "Act'), an individual may claim a Disability Tax Credit ("DTC") if the individual has a severe and prolonged mental and/or physical impairment such that the individual's ability to perform a basic activity of daily living is markedly restricted or would be markedly restricted but for therapy that is essential to sustain a vital function of the individual.

To claim the DTC, a qualified medical practitioner (usually a medical doctor) must certify on prescribed Form T2201, Disability Tax Credit Certificate, that the individual's impairment is prolonged and that the effects of the impairment are such that the individual's ability to perform a basic activity of daily living is markedly restricted. The form must be filed with the income tax return of the person who is claiming the DTC. Before the income tax return is assessed, the form will be reviewed to determine if the person with the disability is eligible for the credit. When submitting the form, remember to include Part A. If the impairment is permanent, it is not necessary to file another Form T2201 in later years unless the circumstances change or unless the form is requested. If the impairment is temporary, a new form must be submitted if the period stated on the certificate has ended.

Subsection 118.3(2) of the Act provides for the transfer to a taxpayer of all or part of a dependant's DTC in certain circumstances. The person with the disability must have been resident in Canada at some time in the taxation year and dependent on the transferee for support (some or all of the basic necessities of life such as food, shelter, and clothing). The disability tax credit may be transferred:

• From a person for whom the taxpayer has claimed the amount for wholly dependent person under paragraph 118(1)(b) or, if the taxpayer is neither married nor a common-law partner, could have so claimed had the disabled person had no income for the year and was 18 years of age or more.
• From the child, grandchild, parent, grandparent, brother, sister, aunt, uncle, nephew or niece of the taxpayer or the spouse or common-law partner of the taxpayer for whom the taxpayer has claimed the caregiver amount under paragraph 118(1)(c.1) or the dependant amount under paragraph 118(1)(d) or could have so claimed had the disabled person had no income for the year and was 18 years of age or more.

However, the disability tax credit may not be transferred:

• If the spouse or common-law partner of the disabled person has claimed a deduction under section 118 or 118.8 in respect of the disabled person or,
• If an amount has been paid for an attendant, or care in a nursing home (other than an amount described in paragraph 118.2(2)(b.1)), and included in computing a medical expense tax credit for the year under section 118.2 by the person with the disability or any other person.

Moreover, subsection 118.3(3) provides that if more than one taxpayer is entitled to claim the amount transferred under subsection 118.3(2), the amount claimed by the taxpayers cannot exceed the total available for transfer.

As a general rule, subsection 152(4) of the Act authorizes CRA to reassess within three years from the date of the original assessment. However, pursuant to subsection 152(4.2) of the Act, CRA may reassess an individual's T1 Return and issue refunds beyond this three-year period for the ten calendar years prior to the date of a taxpayer's request.

In general, there is no specific provision of the Act that would preclude an individual from requesting to have a prior year tax return reassessed for the DTC where the Disability Tax Credit Certificate was signed in one year certifying that the impairment started in an earlier year. Where an individual wishes to claim a tax credit for a previous year already assessed by CRA, the individual should send a request for a T1 return adjustment to his or her Taxation Centre. The request may be made using Form T1-ADJ, T1 Adjustment Request, or by providing a signed letter containing the details of the request, social insurance number, address, and a daytime telephone number. In addition, the request must include all relevant documents, including the Disability Tax Credit Certificate, to support the claim for the tax credits.

Additional information on the DTC can be found in IT-519R2, Medical Expense and Disability Tax Credits and Attendant Care Expense Deduction, and CRA Guide RC4064, Medical and Disability-Related Information.

We trust these comments will be of assistance.

Yours truly,

Randy Hewlett
Manager
for Director
Ontario Corporate Tax Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch