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.