# Rescinding Section 45(2) election



## coffeetrain (Dec 16, 2013)

Does anyone know what the process is for rescinding a Section 45(2) election?

More importantly, is it possible to rescind the election in a prior year or can it only be done in the current year?

The reason I ask is that we changed our principal residence to a rental property in 2011 and filed a "no change in use" election. However, it appears that the value of the property has depreciated since 2011 until we sold in 2013 so it would have been better to do a deemed disposition at the time of change in 2011 and then take CCA against the rental income (or terminal loss when property was sold in 2013).

Any thoughts??


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## domelight (Oct 12, 2012)

I have never heard of a 45(2) being rescinded, however if you have claimed cca on your property you would nullify the 45(2) election only effective in the first year cca was claimed. 
although I appreciate what your are trying to do. CRA would not allow this under section 245 as you are basically attempting to retroactively tax plan in order to create a deduction. You rolled the dice by filing the 45(2) in the first place and crapped out.


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## coffeetrain (Dec 16, 2013)

Thanks for the insight.

In the case of nullifying a 45(2) election then, couldn't one file amended returns claiming CCA (assuming this wouldn't create a rental loss in those years)?

Isn't retroactive tax planning done all the time when people file amended returns to carry back losses, etc?


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## domelight (Oct 12, 2012)

Gonna go point form here.

1. One could amend returns for factual changes for 10 years after CRA's most recent assessment of the applicable year. Optional amounts are only a choice for 90 days after the latest notice of assessment has been issued. and CCA is an optional amount.

2. Loss carrybacks are specifically permitted for in the tax act with detailed and restricting guidelines.

3. The election you filed has no bearing on any info in point one as it is filed with the Tax return as opposed to being part of it.

4. See the link below and refer to sections 53 through 62 to read up on your situation. Then refer to point 57 (a) which states a denial of rescinding 45(2) for the purpose of retroactive tax planning.

http://www.cra-arc.gc.ca/E/pub/tp/ic07-1/ic07-1-07e.pdf

5. Now all that being said You have one (and only this one) opportunity to use CRA's rules against them. Check 2011's return. Is there any reason why you could amend the return for a factual change.

did you forget to report to report any stock exchanges ?
did you forget to deduct amounts for kids ?
what about bank account interest received (they only issues T5's for amounts over $50
make sure you know the difference between what are factual changes and what are elective changes.

If you can find a reason to make a factual change then CRA will issue a new notice of assessment, thereby reopening the 90 day window in which you could request a cca claim on the rental property, thereby nullifying the 45(2) you filed from the beginning. and creating the situation you desire.

This is a very aggressive tactic, however I believe I could substantiate this at audit.


You owe me a bottle for the advice, I drink Gibsons


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