Section 249.1

Subsection 249.1(1)

See Also

Les Développements Iberville Ltée v. Agence du Revenu du Québec, 2018 QCCA 1886 (Quebec Court of Appeal)

no policy of permitting differing Quebec and federal year ends

Three affiliated Quebec corporations sought to avoid most of the Quebec tax on the sale of Quebec real estate at a gain of around $800M (including some recapture) by using a “Quebec year-end shuffle,” which entailed reorganizing to have the gains realized in subsidiary numbered companies that had different year ends for Quebec, and Ontario and federal, purposes. In connection with a finding that these transactions gave rise to an abuse under the Quebec general anti-avoidance rule, Schrager JA noted that establishing different year ends for provincial and federal purposes was contrary to the purpose of the Quebec definition of “fiscal period” in Taxation Act, s. 7 which, in copying the federal definition, did not show any intention to allow different year ends for federal and Quebec purposes, stating (at para. 52):

The definition of fiscal period essentially copied from the federal legislation some years ago cannot in context be characterized as tax policy and certainly not a policy to treat capital gains differently from other provinces or from the federal government. The [definition] … by no means speaks to specifically allowing different financial year-ends for Quebec purposes.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 245 - Subsection 245(4) abuse to use rollover provisions to avoid rather than defer tax 683
Tax Topics - Income Tax Act - Section 85 - Subsection 85(1) abuse of Quebec equivalents of ss. 85(1) and 97(2) to avoid (rather than defer) tax 420
Tax Topics - Income Tax Act - Section 9 - Capital Gain vs. Profit - Real Estate property bifurcated between capital and income portion on acquisition 98
Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(b) - Capital Expenditure v. Expense - Improvements v. Repairs or Running Expense improvements to leased retail premises were not demonstrated to be made only at tenants’ requests 106
Tax Topics - Income Tax Regulations - Regulation 402 - Subsection 402(6) purpose of inter-provincial allocation rules is for 109% of income to be allocated and taxed 558

Administrative Policy

24 December 2020 Internal T.I. 2020-0874951I7 - Change to FPE for CEBA

fiscal period is not set until assessed

Does s. 249.1(7) provide the Minister with the discretion to allow a taxpayer’s request to change the taxpayer’s fiscal period end (“FPE”) where the taxpayer’s return has been assessed, or if the taxpayer has filed the return but it is still not assessed? After indicating that where a taxation year has already been assessed on the basis of a fiscal period end, the Act does not have any provision that allows a reassessment to change the FPE, the Directorate went on to state:

[T]he … [preamble] wording of subsection 249.1(1) indicates that the purpose of specifying a particular period of time as a fiscal period is that a corporation can choose, within the parameters specified under the subsection, a FPE for preparing its accounts for the purposes of assessment. In general, where a corporation has filed its first income tax return, but an assessment is still to be made, the provisions of the Act do not appear to prevent the corporation from sending an amended tax return with a new FPE.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 249.1 - Subsection 249.1(7) a corporate taxpayer can reset its first taxation year end after it has filed its first return and before it has been assessed 88

15 August 2012 External T.I. 2012-0438481E5 - Change of Fiscal Period Year-End

use of Feb. 29 in leap year

In 2012-0438481E5, a corporation with a February 28 year end was not entiled to file on the basis of a February 29 year end in a leap year. Is it CRA's practice to require re-filings where a historical February 28 year-end is filed with a February 29 year end in leap year? CRA responded:

We use the history of the taxpayer's filing pattern to determine the taxpayer's intent with respect to their year-end:

  • If the taxpayer has always filed with a February 28 year-end, even in leap years, and then decides (in a leap year) to file with a February 29 year-end, the IT Rulings Document referenced above would apply as their filing history would indicate that they had originally picked "February 28" as their year-end, and are now trying to change it.
  • If historically the taxpayer has always filed with a February 28 year-end in non-leap years, and with a February 29 year end on leap years, we acknowledge that the taxpayer intends to have picked the "last day of February", and not the specific date "February 28" as their year-end.

11 September 1996 External T.I. 9609405 - FISCAL PERIOD - BARE TRUST

Where a corporation holding real estate acted as bare trustee for its beneficial owner, which was another corporation acting for a group of co-owners of the real estate, s. 249.1(1)(b) would apply if some of the co-tenants were individuals or other entities described in s. 249.1(1)(b).

Paragraph 249.1(1)(a)

Administrative Policy

7 September 2006 External T.I. 2006-0173701E5 F - Exercice financier d'une société

53 week period includes initial period of inactivity

A resident corporation incorporated on December 10, 2005, but which did not begin carrying on its business until December 31, 2005, nonetheless would not be able to establish the end of its first fiscal period as December 31, 2006.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 150 - Subsection 150(1) - Paragraph 150(1)(a) - Subparagraph 150(1)(a)(i) initial period of years of inactivity does not suspend return-filing obligation 28

Paragraph 249.1(1)(b))

Subparagraph 249.1(1)(b)(ii)

Administrative Policy

14 January 2011 Internal T.I. 2010-0383261I7 F - Fin d'exercice d'une société de personnes

s. 249.1(1)(b)(ii) trumps CRA discretion under s. 249.1(7)

The two 50% partners of a partnership (both individuals), transfer their respective interests on August 1 of Year 1 on a tax rollover basis to a corporation. After the rollover, the partnership is owned 99% by the corporation and 1% by an inter vivos family trust. The partnership, which earns income from property, has had a calendar fiscal period end for some time. Would CRA allow the partnership to have a July 31 fiscal period end in Year 1 and a June 30 fiscal period end beginning with the next fiscal period?

After noting that since the partnership had an individual (the trust as a member), s. 249.1(1)(b)(ii) provided that the partnership fiscal period could not extend beyond the end of the calendar year in which it began, the Directorate stated:

[I]t is possible that the Minister would approve a year-end change for Year 1 as long as the request is made for serious business reasons. However, because of the rule in subparagraph 249.1(1)(b)(ii), the partnership's subsequent fiscal period would have to end on December 31 of Year 1, so that unless the partnership agrees to have more than one fiscal period end in the same calendar year, we would consider the partnership's fiscal period to be the calendar year.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 249.1 - Subsection 249.1(7) CRA could under s. 249.1(7) authorize changed partnership year ends that did not extend beyond calendar year limitation in 249.1(1)(b)(ii) 196

Paragraph 249.1(1)(d)

Articles

Lorenzo Bonanno, "Problems with Fiscal Period of Partnerships and Subsection 249.1(1)", Canadian Tax Focus (Canadian Tax Foundation), Vol. 12, No. 1, February 2022, p. 4

Partnership not permitted a 53-week year (p. 4)

  • Unlike a corporation, which under s. 249.1(1)(a) is allowed to choose a 53-week fiscal period, under s. 249.1(1)(d) a partnership cannot have a fiscal period lasting more than 12 months.
  • Thus for example, if a partnership (with corporate partners which are not professional corporations) is formed on December 29, 2021, it must close off its first fiscal year on December 31, 2021 (in which case it could incur penalties under s. 162(7.1) of up to $2,500 if it forgets to file a return for that three-day year) – or, alternatively, it most close off its year at some later date partway through 2022 (e.g., June 30, 2022) and apply to CRA pursuant to s. 249.1(7) for advance permission to change the second fiscal period end to December 31, 2022.

CRA policy on changing year end (p. 4)

  • CRA allows a change in fiscal period where there is a “sound business reason” therefor (2009-0311061I7, 2019-0816111C6 and IT-179R). There is such a reason in the above example if the partnership is seeking to change its year-end to match that of its corporate partners (2009-0311061I7).

Paragraph 249.1(1)(c)

Administrative Policy

18 August 2014 External T.I. 2014-0528001E5 - Fiscal period of a partnership

corporate sub of upper-tier partnership is member of lower-tier partnership

Partnership A, all of whose members are individuals who have elected under s. 249.1(4) since 1995 to have an off-calendar fiscal period end of June 30 for Partnership A, incorporates Aco which forms Partnership B with professional corporations that deal at arm's length with Partnership A's members. Would s. 249.1(1)(c) apply to force Partnership A to have a fiscal period end of December 31st?

CRA responded:

Partnership A's indirect investment in Partnership B through its wholly-owned corporation (Aco) would not, in and of itself, cause Partnership A to be within the ambit of paragraph 249.1(1)(c) since that provision is concerned with tiered partnership structures and contemplates a membership interest in a partnership that is held directly, or indirectly through one or more partnerships, by a partnership.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 249.1 - Subsection 249.1(4) corporate sub of upper-tier partnership is member of lower-tier partnership 105

28 August 2012 External T.I. 2012-0454811E5 - Multi-tiered joint ventures

A corporation with a year end of March 31, 2011, is a participant in a joint venture ("JV1") with a fiscal period end of April 30, 2010. JV1, in turn, is a participant in JV2 with a fiscal period end of May 31, 2009. After referring to CRA's administrative poicy allowing the deferral of the additional income, arising as a result of the withdrawal of CRA's position allowing joint ventures to compute income as if they had a separate fiscal period, for a period of up to five years simialr to the relief provided to partnerships under s. 34.2, CRA stated:

the additional income for the period from June 1, 2009 to March 31, 2011 (22 months) from JV1 and for the period from May 1, 2010 to March 31, 2011 (11 months) from JV2 could qualify for transitional relief.

13 March 2012 External T.I. 2012-0432111E5 - Revised joint venture policy

after adverting to the previous withdrawal of its position that joint venture income could be computed as if the joint venture had a separate fiscal period (see 2011-042958), and the resulting requirement that income for the "stub period" be included in income for the first taxation year commencing after March 2, 2011, and further noting that at the time a joint venture participant files its return for that year actual financial data for the stub period may not be available, CRA stated that it

will generally accept estimated amounts to be corrected to actual amounts for purposes of the stub period income reporting and amend the transitional relief accordingly as long as the JV participant requests that the CRA amend the relevant return on a timely basis.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(a) - Revising Claims stub period CCA on transitioning away from JV CCA claims 149

Subsection 249.1(2) - Not a member of a partnership

Administrative Policy

28 February 2012 External T.I. 2011-0424191E5 F - Fiscal period of a partnership

"share of ... income" references contractual entitlement irrespective of actual partnership income quantum

In the situation where a corporate general partner of the partnership has no entitlement in the particular year to profits of the partnership because of a preferential share of the individual limited partner with the threshold above which the general partner is entitled to participate not having been exceeded, the corporate partner nonetheless would be considered to have a share of the income of the partnership for purposes of s. 249.1(2), so that the election in s. 249.1(4) would not be available. Before so concluding, CRA stated:

[S]ubsection 249.1(2) has been added to allow a person - who leaves a partnership during a fiscal period in a situation where the partnership no longer allows the person, by reason of that departure, to receive a share of the income or loss of the partnership for what would have been the fiscal period of the partnership had it ended at the end of calendar year in which it began - to not be considered as partner.

Words and Phrases
share of income

Subsection 249.1(3)

Administrative Policy

13 January 2010 Internal T.I. 2009-0334931I7 F - Demande de changement d'exercice

requested change to commencement of fiscal period entailed a change to the previous year end

The Directorate noted that since, under s. 249.1(3), “it is not possible to change the commencement date of a fiscal period without changing the time at which the previous fiscal period ends,” a taxpayer request to retroactively change by one day the date on which a fiscal period commenced entailed a request to change the year end for the previous fiscal period.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 249.1 - Subsection 249.1(7) floating fiscal year does not require CRA approval/retroactive change to previous year end to reduce s. 85(8) penalty not permitted 287

29 May 2006 External T.I. 2005-0131701E5 F - Durée de l'exercice d'une société

s. 249(3) did not preclude a 53 week fiscal period covering 3 calendar years

Regarding a corporation's fiscal period that began on December 29, 1996 and ended on January 3, 1998, CRA stated:

[T]he corporation's fiscal period can run from December 29, 1996 to January 3, 1998 - a period not exceeding 53 weeks - and … the subsequent fiscal period of the corporation's business or property begins on January 4, 1998. …

[S]ubsection 249(3) does not affect the length of the fiscal period of a corporation's business or property. Instead, the deeming rule in subsection 249(3) has certain consequences, including the following:

  • An unpaid amount that is otherwise subject to the provisions of subsection 78(4) must be paid no later than 180 days after the deemed year-end determined under subsection 249(3);
  • The tax return will be required to be filed within six months of December 31, 1997;
  • Subsection 15(2.6) requires that a loan to a shareholder made on January 3, 1998, be repaid on or before December 31, 1998 rather than January 3, 1999 in order to avoid including the debt in the shareholder's income for 1998.

Subsection 249.1(4) - Alternative method

Administrative Policy

20 February 2017 External T.I. 2014-0534341E5 F - Partnership change of fiscal period

a partnership of individuals can change with CRA’s permission to a different non-calendar year end

An LP between two individuals has elected under s. 249.1(4) to have a non-calendar year end, say April 30, and now wishes to change to a September 30 year end for tax and accounting purposes to conform with the September year end of a related group of corporations. CRA stated:

Since an election under subsection 249.1(4) was made by SENC1, and SENC1 is not subject to the provisions of paragraph 249.1(1)(b)… an application to the Minister to change the time at which its fiscal year-end ends is still available under subsection 249.1(7). Any such change is, however, subject to the concurrence of the Minister and will generally only be accepted where a serious business reason exists.

…[W]here SENC1 [instead] did not make an election under subsection 249.1(4) within the prescribed time period…it would no longer be possible to avoid the application of paragraph 249.1(1)(b) so that SENC1 could not change the end of its fiscal year.

After noting the time limitation for making the s. 249.1(4) election, CRA described the procedure for making the election:

The election under subsection 249.1(4) should be filed with the Minister with the partner's return of income under Part I of the Act, using Form T1139…. As required by paragraph 96(3)(a), to be valid, such election must be made by a partner having the authority to act for the partnership and must be made in the name of the partner and each other person who was a member of the partnership during the fiscal period,

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 249.1 - Subsection 249.1(7) requirement for serious commercial reason for change in non-calendar year end 80

18 August 2014 External T.I. 2014-0528001E5 - Fiscal period of a partnership

corporate sub of upper-tier partnership is member of lower-tier partnership

Partnership A, all of whose members are individuals who have elected under s. 249.1(4) since 1995 to have an off-calendar fiscal period end of June 30 for Partnership A, incorporates Aco which forms Partnership B with professional corporations that deal at arm's length with Partnership A's members. Could Partnership A retain its off-calendar fiscal period end under s. 249.1(4)?

CRA responded:

[T]he requirement in subparagraph 249.1(4)(b)(ii) is that "the partnership is not a member of another partnership". Accordingly…Aco becoming a member of Partnership B would not preclude Partnership A from retaining its off-calendar fiscal period end under subsection 249.1(4).

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 249.1 - Subsection 249.1(1) - Paragraph 249.1(1)(c) corporate sub of upper-tier partnership is member of lower-tier partnership 131

5 June 2003 External T.I. 2002-0178485 - FISCAL PERIOD OF PROPRIETORSHIPS

Where a proprietorship has not filed an s. 249.1(4) election, the fiscal period of the business will always be from January 1 to December 31 of any calendar year. Where an individual proposes to incorporate a proprietorship, the individual could request (pursuant to s. 249.1(7)) a change in the fiscal period of the business to end immediately before the time of the transfer of the business (so that the proprietorship can claim capital cost allowance for the (shortened) fiscal period that would end immediately before the transfer.

11 September 1996 External T.I. 9610575 - FISCAL PERIOD - CO-OWNERSHIP

Where the income from a rental property held in co-ownership by a corporation, an individual and a trust has been reported based on a June 30 fiscal period, the corporation will not be required to recognize any additional amount for the six-month period ending on December 31, 1995 notwithstanding the application of s. 249.1 to the individual and trust.

Paragraph 249.1(4)(b)

Administrative Policy

16 February 2005 External T.I. 2004-0097161E5 F - Fin d'exercice d'une société de personnes

requirement that there not be a multi-tier partnership must be satisfied each fiscal period

Partnership A is owned by four partners who are all individuals. Partnership A operates four businesses, each with a separate place of business. In the first fiscal period of two partnerships (Partnerships A and B) its four or two partners, as the case may be (all individuals) filed a joint election under s. 249.1(4) for a May 31 fiscal period end of the respective partnerships. Partnership A then transferred the assets of one of its businesses to Partnership B on a s. 97(2) rollover basis. Did such admission of Partnership A as a new partner of Partnership B affect the operation of the s. 249.1(4) election? CRA responded:

[T]he conditions in the preamble to subsection 249.1(4) must … be … satisfied in each of the fiscal periods following that first fiscal period of the business in order for subsection 249.1(4) to continue to apply … .

Among the conditions … [is that] each member of the partnership is an individual and the partnership is not a member of another partnership.

… [W]hen Partnership A became a member of Partnership B, the two partnerships no longer satisfied the conditions of subsection 249.1(4) for the current fiscal period … .

Subsection 249.1(7) - Change of fiscal period

Administrative Policy

24 December 2020 Internal T.I. 2020-0874951I7 - Change to FPE for CEBA

a corporate taxpayer can reset its first taxation year end after it has filed its first return and before it has been assessed

After indicating that where a taxation year has already been assessed on the basis of a fiscal period end (“FPE”), the Act does not have any provision that allows a reassessment to change the FPE, the Directorate went on to state:

[W]here a corporation has filed its first income tax return, but an assessment is still to be made, the provisions of the Act do not appear to prevent the corporation from sending an amended tax return with a new FPE.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 249.1 - Subsection 249.1(1) fiscal period is not set until assessed 178

2017 Ruling 2016-0674681R3 - Sequential Split-Up Butterfly

CRA accommodates year end change so that dividend refund of full RDTOH balance is generated in Year 1

Following a split up butterfly and winding-up of a corporation (DC1) for which DC2 had been a holding company, DC2 is held by three corporations, TC1, TC2 and TC3. DC2 then effects s. 84(1) deemed dividends on a pro rata basis to the three TCs, which is ruled to result in a full refund of its RDTOH. There then is a single-wing split-up butterfly for the distribution of a pro rata portion of DC2’s three types of property to TC1 (including the right to the dividend refund, viewed as near-cash asset).

This single-wing butterfly concludes with the payment of a s. 84(3) deemed dividend to TC1 only (paras. 78-79). The above ruling is predicated on the taxation year of DC2 terminating before the single-wing butterfly, so that all of the dividend refund is generated before the second deemed dividend going only to TC1. The ruling letter states (para. 69.1):

Upon receipt of this Rulings letter in respect of the Proposed Transactions, if not earlier, DC2 will submit a request to the relevant Tax Services Office of the CRA to have a change of year-end. All proposed steps described in Paragraph 70 onwards [respecting the single-wing butterfly] will occur in the next taxation year of DC2.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 55 - Subsection 55(1) - Distribution sequential split-up butterfly with 1% tolerance, triggering of capital gains to generate CDA and RDTOH, and year end change to accommodate RDTOH division 747
Tax Topics - Income Tax Act - Section 129 - Subsection 129(1) capital gain deliberately triggered to generate CDA and RDTOH addition and year end change granted to isolate dividend refund 543
Tax Topics - Income Tax Act - Section 55 - Subsection 55(3.1) - Paragraph 55(3.1)(a) sale of securities for cash proceeds that are reinvested, and tendering shares for shares of offeror 58

20 February 2017 External T.I. 2014-0534341E5 F - Partnership change of fiscal period

requirement for serious commercial reason for change in non-calendar year end

Where a partnership between individuals has elected under s. 249.1(4) to have a non-calendar year end, say April 30, and now wishes to change to a September 30 year end for tax and accounting purposes to conform with the September year end of a related group of corporations (i.e., changing to a new non-calendar year end), such change can be made with CRA’s permission - although such application “will generally only be accepted where a serious business reason exists.”

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 249.1 - Subsection 249.1(4) a partnership of individuals can change with CRA’s permission to a different non-calendar year end 262

2015 Ruling 2015-0605901R3 F - Présomption de gain en capital

taxation year end changed to immediately before building spin-off

The proposed transactions contemplate (in para. 24) respecting a spin-off of real estate by Opco to newly-incorporated Realtyco that "Opco will make an advance request to the CRA to change its fiscal period end in order to close off the latter before the transfer of the depreciable assets so that Opco will claim capital cost allowance for the current fiscal period up to the amount permitted by the Act and Regulations." (Per para. 17, "the fiscal period of Realtyo will be fixed at a date which will permit the avoidance of Part IV tax circularity.")

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 55 - Subsection 55(3.01) - Paragraph 55(3.01)(g) separation of real estate assets beneath new holdco formed by unrelated shareholders 567
Tax Topics - Income Tax Act - Section 55 - Subsection 55(3) - Paragraph 55(3)(a) - Subparagraph 55(3)(a)(ii) spin-off of real estate beneath new common holdco of unrelated shareholders 107
Tax Topics - Income Tax Act - Section 186 - Subsection 186(1) - Paragraph 186(1)(b) year end selection to avoid Pt. IV circularity 97

9 December 2014 External T.I. 2014-0529311E5 - Change the fiscal period end of a partnership

partnership year end change must be for business purposes/avoid multi-tier misalignment

A top-tier partnership, where the lower-tier partnerships have calendar fiscal periods as required by s. 249.1(1)(c), will have a loss from a given source up to the transfer date for the sale by a partner of his interest but not necessarily for its calendar fiscal period. Would CRA grant a hypothetical request to change the partnership's fiscal period end from December 31 to the day before the transfer date to ensure that the former partner can be allocated a loss based on the shortened fiscal period? CRA stated:

[R]equests for changes in fiscal periods … [must] be demonstrated to be prompted solely by sound business reasons other than obtaining tax benefits. Additionally, neither the personal convenience of the taxpayer nor the saving or deferment of income taxes is accepted as a sound business reason. …[T]he request to have the fiscal period of the partnership end before the transfer date is to ensure that the former partner can be allocated a loss based on the shortened fiscal period. Accordingly … it would seem unlikely that the Minister would concur with such a request. Further, granting a request to change the fiscal period end of a partnership in a multi-tier partnership structure that results in the fiscal period ends of the partnerships becoming misaligned would be contrary to the underlying rationale of paragraph 249.1(1)(c).

14 January 2011 Internal T.I. 2010-0383261I7 F - Fin d'exercice d'une société de personnes

CRA could under s. 249.1(7) authorize changed partnership year ends that did not extend beyond calendar year limitation in 249.1(1)(b)(ii)

The two 50% partners of a calendar-year partnership (both individuals), transfer their respective interests on August 1 of Year 1 on a tax rollover basis to a corporation. After the rollover, the partnership is owned 99% by the corporation and 1% by an inter vivos family trust. Would CRA allow the partnership to have a July 31 fiscal period end in Year 1 and a June 30 fiscal period end beginning with the next fiscal period?

After noting that since the partnership had an individual (the trust as a member), s. 249.1(1)(b)(ii) provided that the partnership fiscal period could not extend beyond the end of the calendar year in which it began, the Directorate stated:

[I]t is possible that the Minister would approve a year-end change for Year 1 as long as the request is made for serious business reasons. However, because of the rule in subparagraph 249.1(1)(b)(ii), the partnership's subsequent fiscal period would have to end on December 31 of Year 1, so that unless the partnership agrees to have more than one fiscal period end in the same calendar year, we would consider the partnership's fiscal period to be the calendar year.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 249.1 - Subsection 249.1(1) - Paragraph 249.1(1)(b)) - Subparagraph 249.1(1)(b)(ii) s. 249.1(1)(b)(ii) trumps CRA discretion under s. 249.1(7) 212

13 January 2010 Internal T.I. 2009-0334931I7 F - Demande de changement d'exercice

floating fiscal year does not require CRA approval/retroactive change to previous year end to reduce s. 85(8) penalty not permitted

Must a corporation, having a floating year-end (e.g., the fiscal period ending on the Sunday closest to December 31), seek approval under s. 249.1(7) to set a different year-end date each year? The Directorate responded that, per IT-179R, para. 12, such approval would not be required, but went on to note that the fiscal period could not exceed 53 weeks, and that ‘[s]ubsection 249(3) would apply, for example, if a corporation had a fiscal period from December 29, 2008 to January 2, 2010, to deem a taxation year-end to be December 31, 2009.”

A corporation, that was incorporated on February 2, 2007, filed an income tax return for the fiscal year beginning March 1, 2007 and ending February 29, 2008, and did not file a return for the period of inactivity from the time of incorporation to February 28, 2007. In 2009, it filed a s. 85(1) election respecting a transfer of property to it by a shareholder on February 28, 2007, and is now seeking a commencement date of the fiscal year ending February 29, 2008 be changed to February 28, 2007, thereby reducing the penalty under s. 85(8).

After noting that, in light of s. 249.1(3), this entailed a request for an amendment retroactive to the end of the previous fiscal year ending February 27, 2007, the Directorate stated:

In general, a request for a change of fiscal year will be approved if it can be shown that the request is motivated solely by valid business reasons … .. [T]he reduction of a penalty for late filing of an election, calculated under subsection 85(8), is not a valid business reason. In addition, no retroactive changes are normally permitted. Consequently, we do not believe it is appropriate to allow the corporation's first fiscal period to end before February 28, 2007, to reduce the amount of a penalty payable.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 249.1 - Subsection 249.1(3) requested change to commencement of fiscal period entailed a change to the previous year end 63

Subsection 249.1(8) - Single-tier fiscal period alignment

Administrative Policy

8 March 2012 External T.I. 2011-0429481E5 - Single-tier alignment conditions

s. 249.1(8) requires that the particular day that may be elected to end the fiscal period of a partnership must be after March 22, 2011 and before the day on which that fiscal period would otherwise end. Accordingly, where the partnership fiscal period otherwise would end on August 31, 2011, the members of the partnership may not elect to make a single-tier period alignment to end the partnership fiscal period on October 31, 2011 (the year end of such members).

Subsection 249.1(10) - Conditions to align a partnership fiscal period

Administrative Policy

24 April 2012 External T.I. 2012-0444451E5 - Multi-tier alignment election

Where three corporations with calendar year-ends were members of Partnership X with a calendar fiscal period end, and one of the corporations and Partnership X were the members of a bottom-tier partnership (Partnership Y) with a fiscal period end of January 31, it would be possible for the members of Partnership X to make a multi-tier alignment election under s. 249.1(9) so as to cause the first aligned fiscal period of Partnership X and Y to end on January 31, 2012 (with Partnership X thereby having a one month stub fiscal period), provided the other conditions of s. 249.1(10) were satisfied.