Principal Issues: Whether the Minister may make a determination beyond the period provided by subsection 152(1.4) with respect to a partnership, where there is a misrepresentation that is attributable to neglect, carelessness or wilful default or the partnership committed fraud in filing the return.
Position: Yes.
Reasons: Pursuant to subsection 152(1.2), Division I as it relates to assessments or reassessments apply to determinations or redeterminations under that Division with the necessary modifications.
November 29, 2016
Domestic Compliance Programs Branch HEADQUARTERS Medium Business Audit Division Income Tax Rulings Complex Transactions Section Directorate
Attention: Marius Patras G. Godson
2016-064857
Determinations in respect of a partnership
We are writing in reply to your enquiry of May 18, 2016, wherein you asked whether the Minister may make a determination with respect to a partnership after the expiration of the timeframe provided by subsection 152(1.4) of the Income Tax Act (the “Act”) to determine any income or loss of the partnership for the fiscal period.
In your example, a partnership filed the information return T5013 within the period described in subsection 229(5) of the Income Tax Regulations. A determination under subsection 152(1.4) of the Act was not made and a Notice of Determination was not issued by the Minister under subsection 152(1.5) of the Act. You have established that a misrepresentation was made by the partnership or a person filing the partnership information return. In your view, the Minister may make a determination beyond the 3-year period described in subsection 152(1.4) of the Act where subparagraph 152(4)(a)(i) of the Act applies.
Our comments
Subsection 152(1.4) of the Act provides that the Minister may determine any income or loss of a partnership for a fiscal period within three years after the later of the day on or before which an information return in respect of the partnership for the fiscal period is required to be filed and the day the return is actually filed. Where a determination is made under subsection 152(1.4) of the Act in respect of a partnership for a fiscal period, subsection 152(1.5) of the Act requires that the Minister send a notice of the determination to the partnership and to each person who was a member of the partnership during the fiscal period.
Moreover, subsection 152(1.2) of the Act provides, in part, that the provisions in Divisions I and J, as they relate to assessments, apply to determinations and redeterminations made under Division I, with such modifications as the circumstances require, which, in our view extend to determinations in respect of a partnership.
Under subsection 152(4) of the Act, the Minister may, at any time, issue an assessment, reassessment or additional assessment of tax for a taxation year or notify a taxpayer that no tax is payable for the year. However, assessments, reassessments, or additional assessments of tax, interest or penalties for a taxation year cannot be issued by the Minister after the normal reassessment period in respect of the year unless any of the circumstances described in paragraphs 152(4)(a) or (b) of the Act apply. In particular, subparagraph 152(4)(a)(i) of the Act provides that the Minister may make an assessment or reassessment beyond the normal reassessment period in the case where a taxpayer or the person filing the return has made any misrepresentation that is attributable to neglect, carelessness or wilful default or has committed any fraud in filing the return or supplying any information under the Act.
In our view, pursuant to subsection 152(1.2) of the Act, as it applies with such modifications to a determination in respect of a partnership under subsection 152(1.4) of the Act, the Minister may determine any income or loss of a partnership for a fiscal period and any deduction or other amount, or any other matter in respect of the partnership for the fiscal period beyond the three year period described therein where any of the exceptions described in subsection 152(4) of the Act apply.
Accordingly, in the situation you describe, where it is established that a partnership or person filing the partnership return made any misrepresentation that is attributable to neglect, carelessness or wilful default or has committed any fraud in filing the return or supplying any information under the Act, a determination in respect of the partnership for a fiscal period may be made beyond the three-year period described in subsection 152(1.4) of the Act.
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), 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 version should be e-mailed to: ITRACCESSG@cra-arc.gc.ca.
We trust these comments will be of assistance.
Bob Naufal
Manager
Administrative Law Section
International Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch