2020-0874951I7 indicated that if a request for a retroactive change to a taxation year is made after the corporate tax returns are filed but before the first Notice of Assessment for that year is issued, it will generally be granted – but not if such request is made after such issuance.
Suppose that a corporation incorporated on June 1, 2021 initially chose December 31, 2021 as its fiscal period end, and such calendar taxation year was assessed by CRA on February 20, 2022. With a view to having its first taxation year end instead on March 31, 2022, it files a timely Notice of Objection to the assessment. Once such assessment was cancelled, a tax return could be filed for the desired (June 1, 2021 to March 31, 2022) period.
In rejecting this approach of filing a timely objection to the initial assessment of the first taxation year in order to request the cancellation of that year end, so as to be able to retroactively change it, CRA stated:
For the purposes of subsection 165(3), an assessment may generally be vacated upon receipt of a Notice of Objection if a taxpayer submits additional facts or compelling arguments that were not before the Minister at the time the assessment was made and that demonstrate that the assessment is either invalid (i.e., it would not have been made in accordance with the procedural provisions of the Income Tax Act), or was unfounded (i.e., it assessed an amount of tax that was not based on the applicable provisions of the Income Tax Act as properly interpreted and applied to the relevant facts).
[Here] … there is nothing to suggest that the assessment of February 20, 2022 would be invalid or unfounded so as to justify its cancellation by the Minister under subsection 165(3) More specifically, the mere fact that the corporation wishes to change the timing of its fiscal period end after tax has been assessed for the year corresponding to the fiscal period, even if it is the corporation's first fiscal period, does not, in and of itself, invalidate or render unfounded the assessment of February 20, 2022.