Principal Issues: When the statutory limitation period begins for purposes of assessing a partnership under subsections 162(7) and (7.1).
Position: The statutory limitation period begins at the earlier of the determination of the partnership information return under subsection 152(1.4) and the assessment of an initial penalty under subsections 162(7) or (7.1).
Reasons: The purpose and wording of the relevant provisions of the Act.
May 24, 2011
Compliance Programs Branch HEADQUARTERS Income Tax Rulings Attention: Michael Chun, Manager Directorate International Policy Section Richard Aronoff International and Large Business Directorate (613) 941-7239
2011-039736
Assessment of Penalties on a Late-Filed Partnership Return
This is in response to your email of February 24, 2011, wherein you requested an interpretation as to when the statutory limitation period begins for purposes of assessing a partnership under subsections 162(7) and (7.1) of the Income Tax Act in respect of the failure to file an information return as and when required under the Act.
A partnership information return, containing the information listed in subsection 229(1) of the Income Tax Regulations, is required to be filed without notice or demand by the date set forth in subsection 229(5).
Subsection 152(4) of the Act enables the assessment of a late filing penalty under subsections 162(7) and (7.1) at any time within the normal reassessment period provided in subsection 152(3.1), unless paragraphs 152(4) (a) to (d) apply. Subsection 152(3.1) provides that the normal reassessment period begins when an initial assessment is raised on any amount under Part I or notice is given that no tax is payable.
A partnership return, however, is not assessed. The income or loss may be determined under subsection 152(1.4). It provides that 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.
Subsection 152(1.2) provides, in part, that the provisions in Divisions I and J as they relate to assessments or reassessments apply to determinations and redeterminations, with such modifications as the circumstances require. This enables the timeframes in subsections 152(3.1) and (4) to 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). In addition, subsection 162(8.1) provides, in part, that where a partnership is liable to a penalty under subsections 162(7) and (7.1), section 152 applies to the penalty as if the partnership were a corporation. However, where no determination is made, the provisions of subsection (3.1) do not come into play.
For purposes of assessing a partnership under subsections 162(7) and (7.1) for the failure to file an information return, the statutory limitation period begins at the earlier of the date of determination of the partnership information return under subsection 152(1.4) and the assessment of an initial penalty under subsections 162(7) or (7.1).
Hopefully, these comments will provide you with the clarification that you were seeking. Should you have any questions or require additional information, please do not hesitate to telephone Richard Aronoff at the number provided above.
Yours truly,
Phil Jolie
Director
International & Trusts Division
Income Tax Rulings Directorate