All About Estates

Changes to a loss application in a year where no tax was payable

The Canada Revenue Agency was asked in a technical interpretation whether changes may be made to a loss application after the end of the normal reassessment period where a nil assessment was issued. The Agency’s response gives hope to executor’s with an interest in making adjustments to the prior year tax filings of a deceased person.

In general terms, the Income Tax Act provides that the Minister may not reassess tax payable for a taxpayer after the normal reassessment period unless certain conditions are met. Nonetheless, where a notification that no tax was payable has been issued, there is no need to issue a notice of assessment, reassessment or additional assessment of taxes, interest, or penalties where the requested changes will not result in tax payable. Only if the correction of the errors would make the year taxable, so that an assessment is required, must the statute bar be considered.

The requested adjustments as set out in the hypothetical example in the technical interpretation offset one another resulting in no change to tax payable meaning the adjustment could be made after the normal reassessment period.

The Agency went on to say that, notwithstanding the law, the Minister is not obligated to amend a return where it would be inappropriate to do so. For example, it would be inappropriate fro the Minister to accede to a request where the request is inconsistent with specific provisions of the Income Tax Act or with the scheme of the Act as a whole. As well, it would be inappropriate to accede to a request where the facts indicate that the taxpayer is engaged in retroactive tax planning by changing amounts that were validly included in or deducted from income, but resulted in a less favourable outcome than might otherwise have been achieved.

Be sure to speak with a pro before requesting changes.

About Derek de Gannes
Derek A. de Gannes: Senior Director, Private Client Services of RSM Canada. RSM Canada is committed to the highest level of integrity, quality and professionalism and provides clients with solutions in the area of Audit, Tax and Transaction Services. Email: