nil assessment

The taxpayer (“984”) reported a capital gain on its 2003 sale of land on the basis that it had acquired it from its parent (Henro) on a rollover basis. In 2010, the Minister assessed Henro (to include an income account gain) and 984 (to reverse the previously reported capital gain and refund the capital gains tax plus interest, totalling $1.7M) on the basis that the 2003 drop-down had occurred on a non-rollover basis.

In 2011 the Minister reassessed the taxpayer's 2007 taxation year (the old reassessment) by denying the deduction of various expenses and capital cost allowance claims. After being requested to carry back subsequent losses to 2007, the Minister reassessed to reduce the tax payable in 2007 to nil. Under the new reassessment, the taxpayer was still required under s. 161(7) to pay the interest that had accrued on the additional income from 2007 before the loss carry-back.