S4-F7-C1, para. 1.40 indicates that it does not allow a late-filed s. 88(1)(d) designation where the particular eligible property to be bumped was disposed of in a taxation year that was statute-barred. The Directorate addressed the situation where:
- The Canadian Acquireco formed by a non-resident acquired all the shares of a Canadian public-company target (whose assets included the shares of a U.S. sub) and amalgamated with it.
- The Amalco then sold the shares of the U.S. sub to a non-resident affiliate, and did not make the s. 88(1)(d) designation at the first taxation year end following the amalgamation (“year-end #1”) because a professional appraisal indicated that there was no gain on those shares.
- The TSO proposed to reassess that sale (beyond the normal reassessment period but within the extended s. 152(4)(b)(iii) period) by substantially increasing the proceeds of disposition of those shares.
After quoting from Nassau Walnut to the effect that a late designation was acceptable where the situation “does not raise the spectre of retroactive tax planning,” the Directorate stated:
[I]f the CRA has the ability to reassess the Taxpayer’s Part I income tax return for year-end #1 pursuant to subparagraph 152(4)(b)(iii) with respect to its disposition of the … US shares … the Taxpayer’s late-filed designation request could be considered.