An individual transferred an immovable to his corporation for non-share consideration. The CRA assessed recapture and a capital gain on the transfer. The taxpayer then filed a late s. 85(7) election indicating that preferred shares (which were already part of the authorized capital) were issued on the date of the transfer, and propose to enter into a "deed of correction" providing for the issuance of such shares. On that basis, would CRA accept the late election?
CRA responded:
[T]he CRA will not accept changes to the terms of a contract made after the fact that have the effect of altering the basis upon which an assessment was made, unless a court order is made to that effect.
[E]ven if the "deed of correction" of the Contract …were to be entered into … CRA could not take it into account for the purposes of determining the tax consequences of the transfer of the Immovable. Consequently, CRA would not be able to accept a late election filed by the taxpayer and the Corporation under subsection 85(7) since, based on the Contract initially entered into by the taxpayer and the Corporation, one of the conditions set out in subsection 85(1) (i.e., the issuance by the Corporation of share consideration) would not have been satisfied.