A Korean individual became a resident of Canada in 2005 while owning Korean real property that had previously been purchased $600,000 and that had a fair market value of $1,000,000. When the individual ceased to be a Canadian resident in 2015, its fair market value was $1,500,000. Given that a taxpayer can change a return for a taxation year ending in one of the 10 previous years, would the individual be permitted to claim a foreign tax credit in the individual’s Canadian income tax return for the emigration year respecting the Korean income taxes paid on the eventual disposition of the real property, which could occur before or beyond 10 years from the emigration year? CRA responded:
[P]ursuant to subparagraph 152(4)(b)(i), paragraph 152(6)(f.1) and subsection 152(4.01) … an assessment to take into account a foreign tax credit under subsection 126(2.21) of the Act in respect of foreign taxes paid is permitted only where the assessment is made within 3 years after the normal reassessment period.
…In our view, subsection 152(4.2) of the Act does not provide for an extension of the statutory assessment period referred to in paragraph 152(4)(b) of the Act for a taxpayer’s emigration year with respect to the deduction under subsection 126(2.21) of the Act.
…The Minister is not obligated to reassess a return simply because a waiver is filed by a taxpayer for a particular taxation year … . [A] blanket waiver request without sufficient details of a transaction would likely not be considered valid. …
… 2016-066042 … opined that if 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) of the Act, 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.