Regarding the scenario where CRA makes an arbitrary assessment under s. 152(7) of a non-resident trust on the basis that it became a deemed resident under s. 94(3)(a) in the year assessed, and the trust then files a return for that year accompanied by an election for the purposes of 94(3)(f) to be taxable only on its “resident portion,” the Directorate stated:
If a valid election is filed with a return of income for a taxation year that has already been assessed under subsection 152(7), the return effectively represents a request for a reassessment of the taxation year. The Minister has the discretion under subsection 152(4) to reassess that taxation year unless the legislation restricts such a reassessment. For example, the Minister cannot generally reassess a taxpayer after the expiry of the normal reassessment period for the taxation year (as defined in subsection 152(3.1)) unless an exception in subsection 152(4) applies.
Subsection 152(7) provides that the Minister is not bound by any return or information provided by a taxpayer when making an assessment. However, if the Minister does not exercise her discretion to reassess using the information provided by a taxpayer in a return of income filed after a subsection 152(7) assessment has been issued, so that no reassessment is made, her decision would have to be well supported.