2014-0562271I7 Amending a partnership return - limitation period

Principal Issues: (1) Can a partnership return be amended after the statute-barred date? (2) If so, what provision of the Act allows the CRA to make a redetermination in respect of the partnership and consequently open the taxation year of the partners?

Position: (1) Generally, no. (2) N/A

Reasons: Subsection 152(1.9) should be read in conjunction with 152(1.2), such that a waiver would have to be produced within the three-year limitation period within which the Minister may make a determination. Subsection 152(1.2) provides, in part, that the provisions in Divisions I and J as they relate to assessments or reassessments and to assessing or reassessing tax, apply to determinations and redeterminations, with such modifications as the circumstances require. The time limitations in subsections 152(3.1) and (4) apply to returns that are determined rather than assessed. Consequently, once the income or loss of a partnership return is determined, it is treated the same as an assessment for the purposes of subsection 152(4). Additionally, a taxpayer can be assessed outside the normal reassessment period if the taxpayer files a waiver within their normal reassessment period in respect of the year, as per subparagraph 152(4)(a)(ii). This same rule applies to waivers regarding determinations, as per subsection 152(1.2), meaning that the waiver would have to be produced within the three year period outlined in 152(1.4).

Author: Deak, Andrew
Section: 152(1.4), 152(1.9)

April 23, 2015

Small and Medium Enterprises Directorate                                HEADQUARTERS
Compliance Programs Branch                                                    Income Tax Rulings
112 Kent Street, Place de Ville - Tower B                                   Directorate
Ottawa, Ontario  K1A 0L5                                                            Andrew Deak

      Attention:  Marius Patras    
                                                                                                     2014-056227

      Amending returns sent by a partnership after the statute-barred period

We are writing in reply to your email of December 17, 2014, in which you asked us if there is any provision in the Income Tax Act (the “Act”) which would allow the Canada Revenue Agency (CRA) to accept an amended partnership return after the statute-barred date. Further, if the CRA can legally accept an amended partnership return after the statute-barred date, is there any provision in the Act which allows the CRA to open the fiscal period of the partnership, make a re-determination, and consequently open the taxation year of the partners, if needed?

You indicated that you could not find any provision in the Act which either allows the Minister to accept amended partnership returns after the statute-barred date or prevents the Minister from doing so. In your opinion, subsection 152(1.9) applies only if the waiver is produced within the determination period as defined in subsection 152(1.4). You concluded that the Minister cannot accept an amended partnership return after the statute-barred date of the partnership. Further, you noted that there is no provision which allows the Minister to open a statute-barred period for a partnership with the partnership’s consent.

Our comments

Under subsection 229(1) of the Income Tax Regulations (the “Regulations”), a partnership information return must be filed without notice or demand by the date set forth in subsection 229(5) of the Regulations. Unlike a return of income, a partnership information return is not assessed. Rather, the Minister may determine any income or loss of the partnership for the fiscal period, within three years after the later of the date the partnership information return is required to be filed, and the date the partnership information return is actually filed pursuant to subsection 152(1.4) of the Act. As such, the Minister has the authority to make a determination within a particular timeframe, as set out in subsection 152(1.4).

Subsection 152(1.9) of the Act states that a waiver in respect of the period during which the Minister may make a determination may be obtained by a designated member of the partnership. It should be noted that subsection 152(1.9) does not state when such a waiver must be filed. However, subsection 152(1.9) must be read in conjunction with subsection 152(1.2), which means that a waiver would have to be produced within the three-year limitation period within which the Minister may make a determination. Subsection 152(1.2) provides, in part, that the provisions in Divisions I and J, as they relate to assessments or reassessments and to assessing or reassessing tax, apply to determinations and redeterminations, with such modifications as the circumstances require.  Therefore, the time limitations in subsections 152(3.1) and (4) apply to returns that are determined rather than assessed.  Consequently, once the income or loss of a partnership return is determined, it is considered equivalent to having been assessed for the purposes of subsection 152(4). 

Additionally, a taxpayer may be assessed outside the normal reassessment period for a taxation year if the taxpayer files a waiver within the normal reassessment period in respect of the year, as per subparagraph 152(4)(a)(ii). In our view, as per subsection 152(1.2), the rule in subparagraph 152(4)(a)(ii) applies to waivers regarding determinations, meaning that the waiver would have to be produced within the three year period set out in subsection152(1.4). It is also our view that if subparagraph 152(4)(a)(ii) was not meant to apply to waivers for determinations, Parliament would have expressly said so. Notably, subsection 152(1.2) expressly excludes the application of subsection 164(4.1) to determinations made under subsection 152(1.4). There is no such exclusion for subparagraph 152(4)(a)(ii). 

As such, we agree with your conclusion that the Minister cannot accept an amended partnership return after the statute-barred date of the partnership.

For your information, unless exempted, a copy of this memorandum will be severed using the Access to Information Act criteria and placed in the Canada Revenue Agency’s electronic library.  A severed copy will also be distributed to the commercial tax publishers, following a 90-day waiting period (unless advised otherwise to extend this waiting period), for inclusion in their databases.  The severing process will remove all material that is not subject to disclosure, including information that could disclose the identity of the taxpayer.  Should the taxpayer request a copy of this memorandum, they may request a severed copy using the Privacy Act criteria, which does not remove taxpayer identity.  Requests for this latter version should be e-mailed to: LPRA-PLAR ITR-DDI Access Team-Équipe d'Accès.   In such cases, a copy will be sent to you for delivery to the taxpayer.

We trust that this information is helpful.  If you have any questions regarding the above, please do not hesitate to contact us.

Terry Young, CPA, CA
Manager, Administrative Law Section
International Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch

cc:   Mukaddes Koç, Senior Programs Officer, Assessment, Benefit, and Service Branch; Gilles Rochette, Projects Coordinator, Compliance Programs Branch.

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