| 19(1) | G. Thornley |
| (613) 957-2101 | |
| File No. 5-8969 |
November 21, 1989
Dear Sirs:
Re: Subsection 249(3) of the Income Tax Act (the "Act") and Subsection 1100(3) of the Income Tax Act Regulations
This is in reply to your letter of July 27, 1989 (which was apparently misdirected) and two telephone conversations on November 2, 1989 requesting clarification of the interaction of the above noted provisions. We regret the delay in replying.
You asked particularly if subsection 249(3) requires a company with a floating year-end to use December 31 as a taxation period-end when there is no taxation period ending within a calendar year as a consequence of the corporation's choice of 53 week year-end.
You also ask if it is permitted to claim full capital cost allowance (CCA) for each of the corporations taxation years whether or not subsection 249(3) of the Act applies or must it be prorated so that one day of CCA is lost in each of the 52 week years but not recovered in the 53 week year.
Our Comments
Subsection 249(3) of the Act ensures that a corporation will always have a taxation year for a particular calendar year if the corporation was in existence at the beginning and end of that calendar year. Thus where a corporation has a 53-week fiscal period that commences in, for example 1989 and does not end until 1991, subsection 249(3) of the Act will deem the corporation to have a 1990 year-end of December 31, 1990.
With respect to your question concerning CCA claims in years of less than 365 days, as discussed with you on November 6, 1989, we are of the opinion that where a corporation has adopted a taxation year end which has been consistently followed and accepted for the purposes of assessment and which contains 12 calendar months, the corporation will not be subject to the application of subsection 1100(3) of the Regulations when calculating its capital cost allowance deduction. This would be the case where a corporation selects for example. a taxation year end on the last Saturday in December rather than December 31st of each year.
We are also of the opinion that the same consideration may be extended to a corporation, for instance, the selects the Saturday closest to December 31 each year as its year end.
Further to our second conversation on November 2, 1989, on a strict application of the law it would appear that where a fiscal period is deemed by subsection 249(3) to end on December 31 of a particular year the next fiscal period will begin on January 1 of the immediately following year. However, if you have factual situation involving this matter, we suggest you discuss if with District Taxation Office personnel who may wish to refer the matter to Head Office Assessing Division.
We trust our comments will prove helpful.
Yours truly,
for Director Business and General Division Specialty Rulings Directorate Legislative and Intergovernmental Affairs Branch
c.c. Assessing Division