Assume that a taxpayer did not make a negligent misrepresentation in a year and that the year is beyond the normal reassessment period. Are the transactions undertaken in that year subject to further review by the CRA?
There are lots of tax provisions in the Act that calculate tax related balances at a point in time which are dependent on transactions that have occurred prior to the calculation time. In these situations, adverse tax consequences can arise from mistakes made in statute-barred years.
Some examples? The PUC adjustment in s 85(2.1) is effective “at any time after the issue of the shares”. If the elected amount exceeds the fair market value of property transferred, then the PUC of the shares issued for the property will be ground down to the fair market value (because of the deeming rule that will reduce the elected amount) even if the shares were issued in an otherwise barred year.
Another example? In Canada v Bradley, 1998 CanLII 8053 (FCA), the Court held that invalid charitable donations made in a barred year could not increase a carryforward amount that the taxpayer purported to deduct in a non-barred year.
Summary of John Oakey, “Statute-barred—Are You Sure?” (2016) 13:9 Tax Hyperion
