What are prescribed tax elections?

A prescribed tax election (or tax election) is a special request made to the Canada Revenue Agency (CRA) where a taxpayer can choose how they want to file their taxes under certain circumstances only. In short, an election is a self “election” of how a taxpayer wants to file their taxes.

Tax elections help taxpayers legally avoid paying additional taxes or avoid penalties. An election offers an alternative to the standard tax treatment required by the Income Tax Act. It will usually - but not always - be beneficial.

The Income Tax Act may state how a certain election should be made. For example, an election may require that it be made by filing it with your tax return by a certain date. It may also require a certain form to be filled out.

How do I know if I can make an election on my return?

Are both individuals and corporations eligible for tax elections?

Common elections made

How do I notify the CRA that I want to make a tax election request?

You will know you can make a prescribed election either through information found in a CRA publication, an explanation on a specific form or if you are advised to do so by a tax practitioner.

Some elections are only available to individuals; some only to corporations; and some only to trusts. However, there are prescribed elections available to both corporations and individuals.

Some common elections made by taxpayers are…

Subsections 45(2) & 45(3): Election where change of use (of property)

Subsection 50(1): Debts established to be bad debts and shares of a bankrupt corporation.

Subsection 54: Designation of a principal residence.

Subsection 70(6): Transfers or distributions to a taxpayer's spouse, common-law partner, or spousal/partner trust on the death of the taxpayer.

Subsection 85: Transfer property from an individual or partnership to a corporation.

Subsection 152(4): Reassess tax, interest and penalties for a tax year at any time after the end of the normal reassessment period.

Subsection 164(6): Election to transfer capital losses of an estate to the final return of a deceased taxpayer.

You can get more information on tax elections through the CRA Taxpayer Relief Provisions article that lists all prescribed elections for Taxpayer Relief provisions (when certain conditions are met, you are able to revoke an election or make a late election).

To let the CRA know you want to request an election, fill out its corresponding form (if required) found here and send it in with an accompanying letter and any supporting documentation explaining why you want to add the specific tax election to a tax year you’re filing.

You can either send this information by mail to the CRA’s tax centre, or electronically using ‘submit documents” found in your My Account or My Business Account.

 

Important: Some elections can only be submitted by mail.