A s. 94(3) trust with US trustees and beneficiaries reported a capital gain on its T3 return for its 2020 taxation year respecting its disposition of the shares of a foreign affiliate. In finding that s. 152(4)(b)(vii) did not authorize CRA to reassess the trust beyond the normal reassessment period to adjust the proceeds of disposition, the Directorate indicated:
- Although the explanatory notes to ss. 94(9) and 94(10) stated that s. 152(4)(b)(vii) was added to ensure inter alia that a reassessment of a taxpayer arising out of the application of s. 94(9) or (10) could be made by CRA within 3 years after the normal reassessment period, the application of s. 152(4)(b)(vii) is not limited to situations involving ss. 94(9) and 94(10) and, more broadly, allows an assessment to be made “to give effect to the application of section 94” which, in the Directorate’s view, meant “to cause section 94 to apply.”
- In this regard, s. 94 does not provide rules for computing the trust’s income which instead, in the case of capital gains, are set out in subdivision C of Part I.
- Accordingly, “a reassessment to adjust the proceeds of disposition of the foreign affiliate’s shares held by the Trust would not give effect to the application of section 94” so that s. 152(4)(b)(vii) could not apply to extend the normal reassessment period in this situation.
- “Clause 152(4)(b)(iii)(B) may, however, have application depending on the circumstances.”