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.
MEMORANDUM
DATE: January 9, 1978
TO- AUDIT CONTROLS DIVISION
FROM- HEAD OFFICE Assessing Division
ATTENTION Mr. J.A. Calderwood Director
RE: Continuity of Reserves
I refer to your memorandum of December 16 in connection with GRIER v. M.N.R. ( 77 DTC 368), and the implications of the Board's decision in Grier vis-a-vis a reserve claimed by a taxpayer under subparagraph 40(1)(a)(iii) of the Act.
Where a taxpayer's gain for a taxation year from the disposition of property is reduced by a reserve as described by subparagraph 40(1)(a)(iii), and the taxpayer contravenes subparagraph 40(1)(a) (ii) by failing to bring all or any portion of that reserve into the computation of gains for the immediately succeeding taxation year, computer logic is designed to deny assessment in that subsequent year until the taxpayer's omission from income is corrected.
In effect, the continuity of a reserve previously deducted under subsection 40(1) is preserved by adjusting the appropriate K.P. Field in the current year, and thus the taxpayer's calculation of taxable capital gains or allowable capital losses for that year, to reflect the subparagraph 40(l)(a)(iii) reserve actually deducted in the previous year.
I trust the foregoing is the information you require in this regard.
Director
AB/sm
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© Her Majesty the Queen in Right of Canada, 1978
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© Sa Majesté la Reine du Chef du Canada, 1978
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