Section 233.5 - Due diligence exception

Where s. 94.2(2) deems a non-resident unit trust whose units are majority-owned by an investment dealer, or other taxpayer subject to the mark-to-market (or specified debt obligation) rules ("FI"), to be a controlled foreign affiliate of FI, then the CFA will itself generally be deemed to be a FI, so that in computing the foreign accrual property income of the CFA, the mark-to-market and SDO rules will apply. In commenting on this situation where the FI lacked the data to do this computation properly in Canadian dollars, CRA refused to provide any comfort that it would permit the use of a "proxy" method. CRA went on to state:

… [A] failure to report income as required, and false statements or omissions, in respect of prescribed reporting requirements may result in substantial penalties under section 162 or 163. However, section 233.5 may provide some relief concerning the prescribed reporting requirements where a Canadian taxpayer may not have all the information required to fulfil the reporting requirements of subsection 233.4(4)… . Additional relief in connection with reporting requirements may be available on a case-by-case basis under subsection 220(2.1).

See summary under s. 95(2)(f.14).