22 May 1975 Income Tax Severed Letter

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.

May 22, 1975

Assessing Division

Audit Operations Division

Mr. W.J. Massel Director

Form T2013 - Agreement Among Associated Corporations

We regret the delay in responding to your memos of April 10, and May 16, 1975.

My virtue of Sec. 39(3) R.S.C. 1952 the assessing guide 4-5-67 sets out the following policy:

"where, as a result of a change in fiscal periods, one or more of the associated corporations has two fiscal periods ending in the same calendar year, revised forms should not be accepted after the time has expired for filing a notice of objection in respect of the assessment for the second fiscal period."

By virtue of Sec. 39(3a) (where company did not file form T2013) R.S.C. 1952 the assessing guide 27-6-69 sets out the following:

"Where the aggregate of the taxable incomes of the associated corporations exceeds $35,000 and the corporations have clearly indicated the allocation that they propose by the manner in which the returns have been filed, the allocation so indicated should be used in making the assessments and no notice requesting an agreement should be sent out. This leaves the possibility that the taxpayers will change their minds before the appeal date is passed and file an agreement requesting a change. In that event, it will be necessary to re-assess.

Where a loss in the next subsequent taxation year of one of the associated corporations reduces its taxable income below the amount that was previously taxed at the lower corporation rate and a change in the allocation is requested within a reasonable time, the request should be granted. Usually, such requests should be considered up to the time when the re-assessment is being made because of the loss, or up to one year after the last notice of assessment to the other corporations affected, whichever is the later.

Where a group of associated corporations has received the benefit of the lower rate of tax on the full $35,000, a request for a change in the allocation made after the expiry of the time for filing notices of objection has passed generally should be denied, although there is nothing in the law to prevent the Department from making a re-allocation at any time within the limits imposed by Section 46(4).

The working file in support of "IT" #100 was reviewed and it was determined that a corporation filing a 1972 return would be given until December 31, 1973 to amend their T2013 elections. In an internal memo of the Legislation Branch from R.D. Weil to his Section Chief, the writer indicated that he could see no reason to be unduly harsh in setting a time limit for corporations to make amendments to their elections. No comments were made pertaining to subsequent fiscal periods which is the matter presently under consideration.

In our view, the policy contained in the assessing guide should be updated and a lenient approach taken to accepting a revised T2013 beyond the expiry of the notice of objection date, provided, of course, the taxpayer is not receiving any unintended tax advantage.

A review of Income Tax Act 1972/73 indicated that no new changes were enacted re-amending T2013's previously filed as compared to the 1952 R.S.C.

We believe that, notwithstanding the policy governing other requests for adjustments, it would not be possible for those corporations to have four years to request revisions.

We also suggest that Legislation Branch be requested to revise IT100 and that in the meantime, consideration be given to making this matter the subject of a Hot Line query.

We are forwarding a copy of your memorandum of April 10, to the Technical Interpretation Division.

J.G. Fullarton Director Audit Operations Division c.c.: Mr. W.I. Linton