Election to exclude work in progress (s. 34)

A professional selling or winding down a practice may meet this term in older tax returns, accounting records or sale documents. The answer on unbilled work in progress covers how that work is taxed on a sale.

Where the law stands

Justice Laws shows section 34 as “Repealed, 2017, c. 33, s. 7”. Finance’s explanatory notes describe section 34 as an exception to full accrual accounting for those professions. They say paragraph 34(a) was amended to limit the election to taxation years that begin before March 22, 2017, and that section 34 is repealed effective January 1, 2024. They also describe a five-year transitional rule in subsection 10(14.1) for valuing work in progress of these practices, available to a taxpayer who elected to exclude work in progress for the last taxation year that began before March 22, 2017, so read that subsection for how it applies.

What to ask

• Whether the practice used the election in earlier years, and what the returns show
• Which rule now governs the practice’s work in progress, including the transitional rule
• How the sale agreement treats unbilled work, as in the entry on work in progress