designation

The taxpayer (the “Trust”) had losses for its 1997 to 2003 taxation years as a result of CCA claimed on its principal asset (a Class 13 asset).

Although it had been planned that the portion of deemed dividends received by the taxpayer (arising on the redemption of shares held by it) that did not come out of safe income would be subject to a designation under s. 55(5)(f), all of such amounts were reported by the taxpayer in its return as deemed dividends due to an error by a subsequently-appointed accounting firm. In finding that the taxpayer was entitled to make a designation under s. 55(5)(f) after being reassessed by the Minister under s. 55(2), Robertson J.A.

After retaining a new accountant, an estate sent a letter in November 1994 amending its returns for 1992 and 1993 to make designations under s. 104(13.1), with the intended effect that amounts distributed to the taxpayer (a beneficiary) which had been included in her income by reassessment under s. 104(13) should now be excluded. Archambault J noted testimony that the previous accountant apparently had failed to have the designation made due to a misunderstanding of s. 104(13.1), and stated (at paras. 25, 26 and 34):