The taxpayer in St. Benedict claimed capital cost allowance over the course of its 1997 to 2003 taxation years, thereby generated non-capital losses whose carryforward to its 2014 to 2016 taxation years was denied by CRA because they had expired. The taxpayer then claimed that it incurred a terminal loss in 2017 that could be carried back to those years on the basis that a portion of the CCA claims made in its 1997 through 2003 taxation years should be reversed, thereby reducing the losses in those years to nil and increasing the undepreciated capital cost of the property it had disposed of in 2017. Webb JA found that the “administrative practice [in IC 84-1] is not binding on this Court” and that the taxpayer had no ability to change its choice of having claimed CCA for the earlier years.
Could a taxpayer who wished to refresh losses that were about to expire, reduce previous CCA claims to reduce the losses for those years (Situation 1), or could a taxpayer who did not claim CCA for loss years now make CCA claims for those years in order to increase losses for carry forward to offset trading profits that it was going to realize (Situation 2)?
CRA indicated that CRA’s position regarding the application of IC 84-1, para. 10 so far remains unchanged notwithstanding St. Benedict. However, “the CRA exercises some discretion in determining whether or not to allow a taxpayer's request” to revise CCA claims for prior years and will consider “whether granting the request would produce an inappropriate result.” Regarding revisions for loss years, relevant circumstances could include “whether the loss has expired, whether the loss has been applied to other years, whether the revision would result in a change in the tax assessment for the year or any other year, and whether a Notice of Determination has been issued in respect of the loss.” “Since each decision is based on the facts and circumstances of each case,” it declined to comment on the two Situations presented.