RULINGS DIRECTORATE CORRESPONDENCE SUMMARY
PRINCIPAL ISSUES:
For purposes of the proration of Part I.3 tax for short taxation years in 181.1(2), can the "number of days in the year" be a fraction of a day.
POSITION TAKEN:
No - a portion of a day represents one day.
REASONS FOR POSITION TAKEN:
For other provisions (eg 250(1)(a)) we have taken the position that a portion of a day constitutes one day. Also, definition in Black's Law Dictionary.
LEGAL:
N/A
FINANCE OPINION:
N/A
JURISPRUDENCE:
N/A
RCT PUBLICATIONS:
IT-298
HAA NUMBER:
5638-3
January 7, 1994
| Head Office | Head Office |
| Assessment of Returns Directorate | Rulings Directorate |
| T2 and T3 Programs Division | (613) 957-8953 |
| T2 Programs Section |
Att: C. Ritchie, Chief 933596
Part I.3 Tax - Short Taxation Year
This is in reply to your memorandum dated December 6, 1993. All references to statute are to the Income Tax Act.
You note that subsection 181.1(2) provides that where a taxation year is less than 51 weeks, the amount of Part I.3 tax for the year (determined under subsection 181.1(1)) is to be "reduced to that proportion of that amount that the number of days in the year is of 365". You enquire whether "the number of days" refers to complete days or permits fractions of days. Your enquiry is in the context of a situation in which a corporate taxpayer has filed a Part I.3 return for an eleven hour taxation year and has reduced the amount of its Part I.3 tax for that year to the proportion thereof that 11/24 is of 365. You have requested our early response inasmuch as the Winnipeg Taxation Centre is holding the return for processing.
It is our opinion that the reference to "number of days" in subsection 181.1(2) does not contemplate a fraction of a day - in our view, a portion of a day represents one day. Therefore, the "number of days" in your situation would be "one". This view is consistent with Black's Law Dictionary which includes a definition of "day" such that the whole or any part of a period of 24 hours from midnight to midnight constitutes a day. (We have taken this view, for example, in subsection 250(1)(a) for purposes of determining whether a person has sojourned in Canada in a year for a period of 183 days or more. See also paragraph 1 of IT-298 with respect to the former Canada-U.S. Tax Convention.)
Although we are unable to conclude that this leads to an inappropriate or anomalous result in the situation at hand, we note your suggestion that such might be the case where there are two taxation years in one day. We tend to think that taxpayers involved in such situations would generally consider the Part I.3 implications as part of the overall tax planning for their particular transactions (eg. by arranging coincidental year ends) but that if a serious concern were to arise, presumably the taxpayers would seek a legislative remedy through the Department of Finance.
We hope this will be of assistance to you.for DirectorFinancial Industries DivisionRulings Directorate