8 November 2010 External T.I. 2010-0353711E5 - Reassessment period to make a par. 128.1(8)(c)

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: The time limit within which a taxpayer can request a reassessment of a prior year's return through a paragraph 128.1(8)(c) election

Position: The reassessment needs to be made before the day that is three years after the end of the normal subsection 152(3.1) reassessment period.

Reasons: The combined wording of paragraph 152(4)(b) and subsection 152(6).

XXXXXXXXXX
									2010-035371
									Richard Aronoff
									613-941-7239
Attention: XXXXXXXXXX 	

November 8, 2010

Dear XXXXXXXXXX :

Re: Time Limit within which to Request a Reassessment of Taxes

This is in reply to your letter of January 4, 2010 requesting a technical interpretation of the period of time within which a reassessment could be made to a tax return for a prior year to give effect to an election made in a tax return for a subsequent year pursuant to paragraph 128.1(8)(c). The purpose of the election is to permit a taxpayer to reduce the proceeds of disposition that were deemed to have been received pursuant to paragraph 128.1(4)(b). At the time of emigration from Canada, a taxpayer is deemed, under paragraph 128.1(4)(b), to have disposed of certain property for an amount equal to its fair market value. The purpose of the provision is to tax certain gains and income that have accrued during the period of time the taxpayer was resident in Canada.

Specifically, you request that we advise you as to the following:

1) What is the Minister's position as to whether a notice of reassessment can be issued in respect to the tax return for the year of emigration pursuant to paragraph 152(4)(b), where an election is made seven years later pursuant to paragraph 128.1(8)(c) to reduce the proceeds of disposition for the year of emigration?

2) If paragraph 152(4)(b) places a time limit on reassessing the tax return for the year of emigration, does subsection 152(4.2) provide the Minister with the discretion to issue a notice of reassessment for the year of emigration?

Your position is that there is no express limitation on when a reassessment can be made because subsection 128.1(8) does not specifically state or imply any limitation on the time period in which the post-emigration loss must be realized in order for the loss to be applied in the year of emigration. In addition, you are of the view that there is ambiguity in the reference to subsection 128.1(8) within subsection 152(6) and by extension to paragraph 152(4)(b), which could have been avoided if subsection 128.1(8) were instead referred to directly in subsection 152(4).

In your letter you suggest that the Minister may take the position that paragraph 152(4)(b) operates to prevent the issuance of a reassessment for the year of emigration in the situation where the three year period after the end of the normal reassessment period has expired. That being the case, you argue that an application for relief would be available to an individual taxpayer under subsection 152(4.2) where the Minister has the discretion to extend the reassessment period to 10 years. The taxpayer would then have until the filing of the year 10 tax return to make the election to reduce the amount of the subsection 128.1(4) deemed disposition for the year of emigration.

Subparagraph 152(4)(b)(i) and subsection 152(6) provide criteria whereby the normal reassessment period in subsection 152(3.1) can be extended by an additional three years. Subsection 152(6) affords a taxpayer an opportunity to obtain a refund from an earlier year and enumerates situations where that would be the case. Paragraph 152(6)(f.2) addresses the situation to which you refer. The opportunity is dependent on the time limits described in paragraph 152(4)(b), which allow the Minister to reassess the tax return for the year of emigration provided the reassessment is made before the day that is three years after the end of the normal subsection 152(3.1) reassessment period.

Regulation 600(c) provides that subsection 220(3.2) is applicable to paragraph 128.1(8)(c), which permits the extension of time for electing to claim a deduction for a post-emigration loss. Where the taxpayer is an individual, subsection 152(4.2) allows the Minister, notwithstanding subsection (4), to reassess tax, interest or penalties under Part I in respect of a taxation year if the taxpayer makes an application on or before the day that is ten calendar years after the end of the taxation year. It is noted that, while the Minister has the authority under subsection 220(3.2) to extend the time to elect and under subsection 152(4.2) to reassess, both are discretionary and dependant on the facts.

Information Circular IC 07-1 - Taxpayer Relief Provisions provides information on the discretionary authority the Minister has under the Act to grant taxpayers relief in accordance with this provision. It also explains how a taxpayer makes a request for relief, including the proper information and documentation needed to support such a request, and outlines the administrative guidelines the Canada Revenue Agency will follow in making a discretionary decision whether to grant or deny relief based on a taxpayer's situation.

Should you have any queries or require additional information in regard to this matter, please do not hesitate to contact Richard Aronoff at the telephone number provided at the top of this letter.

Yours truly,

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