The taxpayer, who had been resident in Canada for over five years, realized a capital gain from the deemed disposition of real property situated outside Canada under s. 128.1(4)(b) on emigrating from Canada. Upon the actual disposition of the property, which might be 20 years later, the taxpayer will be subject to foreign income tax on the total gain, accrued from the original acquisition date, including the period of Canadian residency. Although a foreign tax credit under s. 126(2.21) is available for the individual’s emigration year, provided the individual is taxed in another country on a gain that accrued while the individual was resident in Canada and was taxed in Canada in the emigration year under paragraph 128.1(4)(b) , by virtue of ss. 152(6)(f.1) and 152(4)(b)(i), such relief is only available for three years following the end of the normal reassessment period in respect of the emigration year. Is it possible for the taxpayer to keep the emigration year open by filing a Form T2029 Waiver? After noting that “an assessment to take into account a foreign tax credit under subsection 126(2.21) … in respect of foreign taxes paid is permitted only where the assessment is made within 3 years after the normal reassessment period,” CRA stated:
[A] blanket waiver request without sufficient details of a transaction would likely not be considered valid. …[I]f any of the circumstances to support the deduction under subsection 126(2.21) of the Act (e.g., disposition of the property and/or foreign taxes paid) are present within the statutory assessment period referred to in paragraph 152(4)(b) …, it may be appropriate for the Minister to consider a taxpayer’s waiver request for the emigration year to allow the Minister sufficient time to review and process any potential reassessment for this deduction beyond the aforementioned reassessment period.