An article published in La Presse on the Earl Jones fraudulent scheme case indicated that CRA permitted the investors to file amended returns going back 10 years in order to back out previously reported investment income which, on discovery of the fraud, turned out to have been fictitious. Where it is discovered that fictitious income has been reported, can the victims amend their previously-filed returns rather than only having recourse to a current bad debt deduction? Before going on to discuss the s. 20(1)(p) deduction, CRA stated:
[T]he general position of the CRA in this type of situation is to not allow the investor to amend the investor’s tax returns for prior years in which the "fictitious" income was declared to exclude it from income. Unless there are exceptional circumstances leading to a contrary conclusion, the CRA is generally of the view that at the time the income was reported by an investor, it was a return on the investor’s investment that was to be included in computing the investor’s income.