Section 160

Subsection 160(1) - Tax liability re property transferred not at arm’s length


Canada v. 594710 British Columbia Ltd., 2018 FCA 166

stock dividend followed by redemption of the stock dividend shares effected in combination a transfer of property for no consideration

Income account treatment of the profits realized by a condo-project limited partnership was avoided through the corporate partners (the Partnercos) of the partnership paying safe income dividends (out of the realized but unallocated condo profits) to their respective Holdco shareholders through the payment of stock dividends of preferred shares followed by a redemption of those preferred shares – in turn, followed by a sale by the Holdcos of the Partnercos to a public company with substantial resource pools (Nuinsco). The income of the partnership for the year in which the condo sales had occurred was allocated to Nuinsco following the winding up into it of the Partnercos.

After first finding that the allocation of the income to Nuinsco rather than to the Partnercos represented an abusive avoidance for purposes of s. 245(4) of ss. 96(1)(f) and 103(1), Woods JA went on to find that s. 160 would apply to the transfer of property of the Partnercos to the Holdcos effected through the preferred share stock dividends and redemptions, stating (at paras. 112, 115):

The stock dividends and the redemption together resulted in a transfer of cash “indirectly … by any means whatever” from Partnerco to Holdco without consideration. …

Although the Algoa Trust decision deals with a cash dividend, the combination in this case of stock dividends followed by a redemption has the same effect and similarly results in a transfer of property without consideration.

Words and Phrases
Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 245 - Subsection 245(4) allocation of most partnership profits to a lossco that acquired its interest at year end without economic risk was vacuous and abused ss. 96(1)(f), 103(1) and 160 596
Tax Topics - Income Tax Act - 101-110 - Section 103 - Subsection 103(1) s. 103(1) likely applies to the allocation of most of the partnership profits at year end to a lossco that never had significant economic interest or risk in the partnership business 311
Tax Topics - Income Tax Act - Section 152 - Subsection 152(8) s. 152(8) cured an error in an assessment as to when the taxation year in question commenced 361

Lemire v. The Queen, 2013 DTC 1065 [at 346], 2012 TCC 367, aff'd 2014 DTC 5088 [at 7100], 2013 FCA 242

in Quebec, deposit of funds into another's account is not a "transfer" if the depositor retains "patrimony" over the funds

The taxpayer's common-law partner, in order to circumvent a hold on his account relating to personal financial difficulties, would have the taxpayer deposit the cheques in her account, and then usually transfer the funds to him on the same day. Tardif J. found that these transactions did not effect a "transfer of property" to the taxpayer for the purposes of s. 160(1). Although the Court of Appeal in Livingston held that the mere deposit of funds into another person's bank account constitutes a transfer of property, Tardif J stated (at TCC para. 35):

The fact that an item of property is simply in the possession or control of a third party does not have the effect of removing it from the tax debtor's patrimony. Although the scope of the word "transfer" is broad, a transfer still requires the transferor to meet a condition precedent, namely, to have actually vested the property in the alleged transferee or recipient.

The taxpayer followed her partner's instructions precisely, she rarely held the funds for more than a few hours, and she never had any right to enjoy or dispose of the proceeds (para. 71). Tardif J therefore found that, even if there were a transfer, the taxpayer's behaviour was consistent with a mandatary relationship under civil law, and transfers of property to a mandatary are not transfers of property under s. 160(1).

Noël JA affirmed that Tardif J's decision was correct under civil law, noting in particular that Livingston dealt with common law (FCA para. 30).

Words and Phrases

Canada v. 9101-2310 Québec Inc., 2013 DTC 5172 [at 6455], 2013 FCA 241

In order to defeat a claim of a bank, a tax debtor ("Garneau") deposited $305,000 with the taxpayer (whose shareholder was his friend) to hold on his behalf and disburse as directed. Noël JA found that s. 1452 of the Civil Code entitled a third party (here, the Minister) to avail itself of the "apparent contract" (i.e., Garneau's apparent divestment of the funds to the taxpayer) notwithstanding that this was a "simulation" under s. 1451, so that s. 160 could be applied as if there had been a property transfer. Furthermore, the taxpayer and Garneau were not dealing at arm's length as they were acting in concert: see summary under s. 251(1)(c). S. 160 applied.

Respecting a hypothetical similar transaction in a common law province, Noël JA noted (at para. 53):

The rule to be gleaned from [Livingston] that the transfer of legal title in a sum of money may give rise to a transfer for the purposes of subsection 160(1) where it is intended to conceal the fact that the tax debtor is the beneficial owner of this sum and thwart the tax authorities' collection efforts.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 251 - Subsection 251(1) - Paragraph 251(1)(c) accommodation party was acting in concert 171

Yates v. Canada, 2009 DTC 5758, 2009 FCA 50

In allowing her husband to live in the family residence, the taxpayer was not providing consideration at fair market value. A line of cases that took the position that payments made in satisfaction of a legal obligation to support his family were beyond the reach of section 160, was overruled. Accordingly, s. 160 applied to a transfer of property effected to the taxpayer when her husband removed his name from two joint bank accounts and deposited his paycheques into the taxpayer's account.

Canada v. Rose, 2009 DTC 5076 [at 5806], 2009 FCA 93

The taxpayer's husband transferred his co-ownership interest in the matrimonial home to the taxpayer in order to prevent a creditor from placing a lien on the home. In reversing the finding of the Trial Judge that her husband had only transferred registered title and not the beneficial interest to the taxpayer, Evans, J.A. stated (para. 31) that it was an "almost inescapable inference" from the statement of the husband's purpose in transferring title that "he intended to do this in the most effective, and lawful, manner" that is, by transferring his entire interest in the house" (para. 31).

Canada v. Livingston, 2008 DTC 6233, 2008 FCA 89

In order to help her friend (Davies) defeat efforts of CRA to collect unpaid taxes from Davies, the taxpayer opened up a bank account in the taxpayer's own name to which Davies deposited funds from time to time and from which Davies from time to time withdrew funds to pay Davies' expenses. After noting (at para. 22) that "subsection 160(1) categorizes a transfer to a trust as a transfer of property", Sexton J.A. went on to note (at para. 27) that "it is clear that the transaction between Ms Davies and the respondent left Ms Davies without anything equivalent to the property transferred that could be collected by the CRA, and thus there could not possibly be consideration". Although "forbearance - the act of refraining from enforcing a right, obligation, or debt - can act as consideration for a promise given in return ... there is no legal forbearance in this case." (para. 29)

The taxpayer's appeal of an assessment of her under s. 160(1) was dismissed.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 251 - Subsection 251(1) - Paragraph 251(1)(c) accommodation bank account 98

Canada v. Addison & Leyen Ltd., 2007 DTC 5365, 2007 SCC 33, [2007] 2 S.C.R. 793

delay in assessing under s. 160 not reviewable

The taxation year of a corporation ("York") owned principally by one of the applicants ("Addison") ended on September 28, 1989 by virtue of a sale of York to a third party ("Senergy"). During its September 28, 1989 taxation year, York incurred a tax liability as a result of an asset sale, retained cash sufficient to pay the estimated amount of that tax liability, and made various payments in the year including directors fees, retiring allowances, management fees, loans and dividends. Although at the time of the sale of York to Senergy, York's net asset value was approximately nil, Senergy paid over $1 million for the York shares because Senergy had arranged for York to purchase seismic data immediately before the closing of the sale with a view to a resulting deduction eliminating tax liabilities of York.

In rejecting the taxpayer's submission that the long delay of the Minister in assessing the applicants under s. 160 was abusive and should be subject to judicial review under s. 18.5 of the Federal Courts Act, McLachlin C.J. noted that the Minister had the discretion under s. 160 to reassess a taxpayer at any time, so that "the length of the delay before a decision on assessing a taxpayer does not suffice as a ground for judicial review, except, perhaps, in as much as it allows her a remedy like mandamus to prod the Minister to act with due diligence once a notice of objection has been filed" (para. 10) and stated (at para. 11) that "judicial reviews should not be used to develop a new form of incidental litigation designed to circumvent the system of tax appeals established by Parliament and the jurisdiction of the Tax Court."

Wannan v. Canada, 2003 DTC 5715, 2003 FCA 423

The Court followed Heavyside v. Canada, 97 DTC 5026 (FCA) in finding that the liability of the taxpayer under s. 160 with respect to contributions made to her RRSP by her husband was unaffected by his subsequent bankruptcy and discharge from bankruptcy, or by the fact that she was not assessed under s. 160 until after such discharge from bankruptcy. Furthermore, in determining what was the tax liability of her husband at the time of the contributions, the Crown was not bound to treat the payment to it of a bankruptcy dividend as being applied in payment of the oldest balances owing to the Crown by the taxpayer's husband and, instead, was not precluded from applying this bankruptcy dividend, as it did, to the newest of his tax liabilities.

Locations of other summaries Wordcount
Tax Topics - General Concepts - Payment & Receipt application of payment by creditor 106

Delage v. Canada, 2002 DTC 7061, 2002 FCA 212

The taxpayers had been unsuccessful in establishing an alleged connection between service rendered by them and dividends on shares held by them, so that it was not necessary to determine, for the purposes of section 160, whether the work presumably performed could constitute valuable consideration for the issuance of dividends.

Williams v. Canada, 2002 DTC 7463, 2002 FCA 380

The Court rejected a submission that a payment of the salary of the taxpayer's husband directly to her bank account was a transfer for consideration because it was made in satisfaction of his lawful obligation to support her to the level of her accustomed standard of living under s. 30 of the Family Law Act (Ontario).

Delage v. Canada, 2002 DTC 7061, 2002 FCA 212

The taxpayers were unable to establish that an amount paid to them as a dividend was, in fact, salary for services.

Biderman v. The Queen, 2000 DTC 6149, 2001 FCA 269 (FCA)

conduct subsequent to death inconsistent with disclaimer

The taxpayer made an "informal" disclaimer of his beneficial interest under the estate of his wife five days prior to her death (which was found to be invalid because the common law required that a disclaimer be made after the death of the legator) and, three years after her death, made a formal disclaimer. The formal disclaimer was found to operate as a surrender and release, rather than a disclaimer, because his conduct subsequent to her death was inconsistent with a disclaimer. Accordingly, the purported formal disclaimer acted as a transfer of property by him to the beneficiaries (his and her children).

Létourneau J.A. went on to note that because a disclaimer does not involve the vesting and divesting of property but, rather, operates by way of retroactive avoidance of a devise, s. 160 would not have applied if there had been a valid disclaimer.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 248 - Subsection 248(8) - Paragraph 248(8)(b) purported disclaimer was release or surrender 153

Gaucher v. The Queen, [2000] F.C.J. No. 1869 (QL), Docket: A-275-00 (CA)

transferee can challenge substantive merits of underlying assessment

In finding that the beneficiary of a transfer who had been assessed under s. 160 was permitted to challenge the primary tax assessment of the transferor (her husband), on the basis that the primary assessment was statute-barred, Rothstein JA stated (at para. 6):

It is a basic rule of natural justice that, barring a statutory provision to the contrary, a person who is not a party to litigation cannot be bound by a judgment between other parties. The appellant was not a party to the reassessment proceedings between the Minister and her former husband. Those proceedings did not purport to impose any liability on her. While she may have been a witness in those proceedings, she was not a party, and hence could not in those proceedings raise defences to her former husband's assessment.

Medland v. Canada, 98 DTC 6358 (FCA)

There was a transfer of property to the taxpayer for purposes of s. 160(1) when her husband, who was the joint mortgagor on a house that at the relevant times, was owned by her, paid monthly amounts due under the mortgage. By virtue of such payments, the taxpayer became less indebted and her equity in the property increased. The words "property" and "transfer" had been broadly defined in the jurisprudence.

Words and Phrases
property property acquired

Canada v. Heavyside, 97 DTC 5026 (FCA)

The taxpayer was liable under s. 160(1) in respect of the transfer of property to her by her husband, notwithstanding that her assessment under s. 160(1) followed her husband's discharge as a bankrupt. The order of discharge did not affect the liability of the taxpayer, and the earlier decisions in Caplan v. The Queen, 95 DTC 709 (TCC) and Gamache v. The Queen, 96 DTC 1436 (TCC) dealing with this issue were referred to as being confused.

Kostiuk v. The Queen, 93 DTC 5511 (FCTD)

Strayer J. found that there had been a "transfer" within the broad meaning of s. 160(1) of a beneficial interest in the land to the taxpayer by her father prior to the introduction of the expanded version of s. 160(1) effective November 12, 1981 given that prior to that date her father had entered into a separation agreement with his wife binding him to transfer the land to his daughter. It was irrelevant that a land transfer document signed by him prior to November 12, 1981 turned out to be unregistrable and had to be replaced later.

Locations of other summaries Wordcount
Tax Topics - General Concepts - Transitional Provisions 91

Mah v. The Queen, 93 DTC 5267 (FCTD)

A proported transfer to the taxpayer by his parents of their home without his knowledge or consent did not divest them of their beneficial rights to the property and, therefore, did not constitute a transfer for purposes of s. 160. Transactions to transfer the beneficial ownership to the taxpayer did not occur until a taxation year subsequent to that assessed.

Furfaro-Siconolfi v. The Queen, 89 DTC 5519 (FCTD)

A marriage contract between the taxpayer and her husband had provided that he "shall ... and furthermore donates unto his said future wife hereto present and accepting [$30,000] ... to be paid at any time during the marriage as he sees fit, the First Party hereby constituting himself debtor of the Second Party to the extent of the said sum."

Under the Civil Code, there was a "transfer of property" at the date of the marriage contract, rather than at the time of payment three years later, with the result that s. 160 could not be applied on the basis of the husband's tax position at the time of payment.

See Also

Monsell v. The Queen, 2019 TCC 5 (Informal Procedure)

CRA has the onus of substantiating assessments underlying s. 160 assessments where it had superior records access

The taxpayers (a husband and wife) received payments from a corporation (Newgate) that had been reassessed for its 2005 to 2007 taxation years and had not objected thereto (and subsequently was dissolved.) Their only ground of appeal was that these “underlying” reassessments were incorrect.

D’Auray J first noted (at para. 21) that “the case law is clear that a taxpayer faced with a section 160 assessment may challenge the underlying reassessment,” and the principle in Mignardi that “where the facts concerning the underlying reassessments are exclusively or peculiarly within the knowledge of the Minister, the onus will shift to the Minister to show the correctness of the underlying reassessments” (applied in Andrew (2015 TCC 1): “where the taxpayer ‘does not have and cannot obtain the information required to verify the existence or amount of the underlying tax liability’” (para. 23).) In finding that the Minister failed to discharge her onus to prove the correctness of the underlying reassessments for 2005 and 2006, she stated (at para. 28):

Newgate’s documents were at one time within the custody and the control of the CRA. However … the CRA lost or destroyed the documents. In light of this evidence, it would be unfair to place the onus on the appellants.

In finding that for the 2007 year, the onus was instead on the taxpayers, and before finding that they had failed to discharge this onus, she stated (at para. 29):

The appellants had available to them Newgate’s 2007 income tax return, as well as that of its associated corporation … . As no audit was performed by the CRA for Newgate’s 2007 taxation year, the Minister relied solely on the income tax returns filed by both corporations to reassess Newgate.

Since the amount of the underlying reassessment for 2007 was greater than the amount of the two payments made to the taxpayers, their s. 160 assessments were upheld.

Locations of other summaries Wordcount
Tax Topics - General Concepts - Onus onus on CRA where it, rather than taxpayer, had access to the records underlying a reassessment 210
Tax Topics - Income Tax Act - Section 125 - Subsection 125(3) - Paragraph 125(3)(b) SBD denied because no agreement made 92

De Vries v The Queen, 2018 TCC 166

if requirement to pay assessment had been valid, it would have flowed through with a dividend

The two individual shareholders (husband and wife) of a corporation (“IPG”) were assessed under s. 160 regarding a dividend they had received from IPG on the basis that, at the time of the dividend, IPG had been assessed for failure to comply with a s. 224(1) requirement to pay (“RTP”) effectively requiring it to pay to CRA a demand loan owing by it to a former employee and business associate (“Houweling”).

Paris J accepted testimony that Houweling had orally agreed, prior to the receipt by IPG of the RTP, to postpone his right to receive repayment of the loan until the conclusion of a significant suit brought by IPG against a third party. He further found that “there has been an evolution in the doctrine of consideration in the context of contract modifications,” so that now “when parties to a contract agree to vary its terms, the variation should be enforceable without fresh consideration, absent duress, unconscionability, or other public policy concerns” (para. 57).

As the oral agreement of Houweling to postpone payment was contractually binding, the assessment of IPG for its purported failure to honour the RTP was invalid, so that there was no corporate liability to flow through to the taxpayers under s. 160.

In rejecting the taxpayers' alternative argument that they had provided consideration for the dividend, he stated (at para. 67):

The jurisprudence is conclusive that contributions made to a company by its shareholders do not constitute consideration for the payment of dividends by the company to those shareholders. The right to receive dividends is a right that attaches to shares and not to shareholders such that a shareholder’s right to receive the payment of a declared dividend flows directly from his or her status as the owner of shares.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 224 - Subsection 224(1) a corporate creditor’s oral agreement to postpone collection of his loan defeated a RTP encompassing that loan 346
Tax Topics - General Concepts - Effective Date oral agreement to postpone changed terms of loan 175

Aitchison Professional Corporation v. The Queen, 2018 TCC 131

s. 160(1) did not apply to a tax debtor providing services free of charge to the NAL transferee of his professional practice

At a time that James Aitchison owed $2.1 million in taxes, he transferred his law practice to a newly-incorporated professional corporation (the appellant) and thereafter worked for it as an unpaid volunteer or employee. His two daughters (also lawyers) worked for the appellant at market salaries and in the first three years received over $1 million in dividends as a result of “an improbable share structure and a complete disregard for dividend rights.”

In finding that James had not transferred property to the appellant by virtue of choosing not to negotiate a salary for his valuable professional services, Graham J stated (at paras. 16, 19):

An employee negotiates the terms of his or her employment with the firm. Nothing that the employee provides to the firm could be described as “property”. An employee provides services, not property. The same is true for a volunteer.

By definition, volunteers are not compensated for their work. While employees should, of course, be fairly compensated for their work, their right to compensation flows from the employment contracts that they negotiate. The right to negotiate is a right that everyone possesses and that is enforceable against no one. It is not “property”. If an employee negotiates a poor contract, the potential salary that he or she leaves on the table is not “property” that he or she has transferred to his or her employer. It is simply a lost opportunity. An employee does not have an enforceable right to the salary that he or she never negotiated. This is true even if an employee agrees to work for free.

He went on to state (at paras. 32, 35):

This case demonstrates that there is clearly a gap in section 160 … [but s]imply amending section 160 to cause it to cover the non-arm’s length provision of services may have undesired consequences. …

If a tax debtor spent all of his or her free time caring for his or her aging parents, would the Minister assess the parents for the fair market value of that care?

Words and Phrases
Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Property (foregone) right to negotiate a significant salary was not property 161

HLB Smith Holdings Limited v. The Queen, 2018 TCC 83

s. 160 liability flowed through with dividends paid to 50-50 unrelated shareholders

Two individuals held their 50-50 Opco through a holding company held by a family trust, in the case of Mr Smith, and through a family trust in the case of Mr Scott. Whether unpaid tax liabilities attached under s. 160 to dividends paid regularly by the Opco, for distribution up the chain, turned on whether they were not dealing at arm’s length with Opco. Although each did not control Opco, D’Arcy J followed Fournier in finding that they were acting in concert respecting the payment of the Opco dividends, so that s. 160 so applied (para. 28):

Mr. Smith and Mr. Scott as the Operating Company’s only directors and officers acted in concert and with a common economic interest to decide how they would withdraw the profits made by the Operating Company for their personal use.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 251 - Subsection 251(1) - Paragraph 251(1)(c) two individuals jointly controlling a company were acting in concert respecting the payment of dividends 283

Nelson v. The Queen, 2017 TCC 178 (Informal Procedure)

agreement between husband and wife established that joint bank debt was borne on 50-50 basis

Lafleur J found that although each of a husband and wife was fully liable to the bank for all amounts advanced to either of them under their joint line of credit, an oral agreement between them, that each had 50% responsibility for the amounts drawn down under the line of credit, should be respected for tax purposes. Accordingly, in dealing with the ETA equivalent (s. 325(1)) of ITA s.160, she found that ½ of the amounts drawn down under the line of credit to fund the husband's company constituted an advance by the wife of money borrowed by her, so that ETA s. 325 did not apply when her husband later transferred real estate to her to pay down that advance.

Words and Phrases
Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 325 - Subsection 325(1) the agreement between two co-borrowers as to their respective responsibility for joint loans governed for tax purposes 304

Kvas v. The Queen, 2016 TCC 199

involuntary dissolution did not render the corporation a transferor

The general contracting company (“CIA”) of two brothers was dissolved in January of 2008 (the “Dissolution Date”) for failure to file Ontario corporate tax returns. Although “upon such dissolution, the property of CIA technically and legally escheated to the provincial Crown” (para. 40), in fact, a CIA bank account was thereafter used to pay various CIA creditors. The Minister assessed the brothers under s. 160 on the basis of alleged property transfers to them after the Dissolution Date.

Bocock J found that there were no actions of CIA that constituted a transfer under s. 160, stating (at paras 28, 33, 40):

[S]ection 160 requires a transfer by a transferor. … [T]here is no case law that suggests a transferor includes a person who ceases to exist and has not otherwise undertaken some act or omission which transfers property prior to its… demise or dissolution. …

After its dissolution, CIA could not legally, and … did not factually direct, author or contemplate such a transfer… .

…There is no jurisprudence which suggests that the act or intention of a transferor (as opposed to that of a transferee) is unnecessary in order to engage section 160.

Words and Phrases
Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 84 - Subsection 84(2) involuntary dissolution was not a s. 84(2) winding-up 160

594710 British Columbia Ltd. v. The Queen, 2016 TCC 288, rev'd 2018 FCA 166

indirect transfer of property to taxpayer did not entail departure from FMV

The taxpayer was a holding company and Canadian-controlled private corporation which wholly-owned a “Partnerco” holding a 24.975% limited partnership interest in a strata development partnership (“HLP”) which, by May 25, 2006, had realized income of $13 million from the sale of most of the strata units, and was projected to realize another $863,546 of profit from the sale of the remaining six units. The three siblings of the shareholder of the taxpayer (“Rossano”) held their interests in HLP under the same Holdco-Partnerco structure, and the general partner, holding a 0.1% interest, was held by Rossano.

On May 25, 2006, HLP lent $8.5 million ($2.1 million each) to the four Partnercos, and then each Partnerco immediately declared a stock dividend of preferred shares with a paid-up capital and redemption amount of $2.1 million to each Holdco, with each Partnerco using the proceeds of such loan to redeem the preferred shares. Each Partnerco then paid a further stock dividend of preferred shares in the amount of the anticipated gain on the unsold strata units (for which it had been granted a put option by the developer).

On May 29, 2006, each Holdco sold its shares of its Partnerco to an arm’s length public corporation (“Nuinsco”) with substantial resource pools (and Nuinsco acquired the shares of the general partner for $1.) HLP then lent its cash of $4.4 million to Nuinsco.

On May 30, 2006, each Partnerco was wound up into Nuinsco and Nuinsco was admitted as sole limited partner of HLP. On May 31, 2006, HLP allocated its income of $12.1 million to its partners (mostly, Nuinsco). HLP then sold its remaining strata units (mostly to the developer), and HLP was dissolved.

In finding that s. 160 did not apply to the transactions, Rossiter CJ stated (at paras. 136-138, 147):

The purchase by Nuinsco of the common shares and the preference shares issued in the Second Stock Dividend is, in my view, an indirect transfer of property from Partnerco to the Appellant, when considered in conjunction with the steps leading to and including the Nuinsco Loan. …

HLP loaned an amount in question to Nuinsco that would have been otherwise able to be distributed to Partnerco and its fellow partners. As a result, the Partnercos indirectly transferred property to Nuinsco and then on to the Appellant and the other Holdcos. …

The question is therefore whether Partnerco transferred this property for less than FMV. …

The Appellant has shown that at the end of this series of transactions, Partnerco was left none the poorer. It remained a limited partner in HLP right upon until its winding-up, while the assets of HLP changed from cash to a promissory note of the same value. As a result, I cannot conclude that there would have been an underlying liability under section 160.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 245 - Subsection 245(2) GAAR reassessment must reflect the abuse 305
Tax Topics - Income Tax Act - Section 245 - Subsection 245(4) GAAR did not apply to the sale to a lossco of partner corps with pending condo sale profit allocations 626
Tax Topics - Income Tax Act - Section 96 - Subsection 96(1) - Paragraph 96(1)(f) LP profits can be allocated to purchasing partner at year end 266

Baker v. The Queen, 2016 TCC 120 (Informal Procedure)

CRA assessed under s. 160 so as to give credit for Quebec tax paid under the Quebec equivalent

The taxpayer’s mother died in 2008, leaving her four children equal undivided shares in her residence in Quebec. Prior to the distribution to them of such shares in January 2016, a brother of the taxpayer (Robert) died in 2011. Robert’s ¼ interest was transferred equally to the three surviving siblings immediately after the distribution to the four beneficiaries of their respective shares of the residence. Unpaid federal income taxes of Robert exceeded the value of his ¼ interest in the residence. The taxpayer was assessed under s. 160 for the difference between the value of the property interest transferred to her by Robert and an amount paid by her to the ARQ pursuant to the Quebec equivalent of s. 160. The taxpayer relied in part on a stipulation in her mother’s will that the assets bequeathed could not be seized because of any of her heirs’ debts.

Smith J stated (at para. 37):

[T]he transferor’s intention to avoid a tax debt is not relevant, nor is his or her knowledge of the existence of a tax debt.

Smith J also found that the exemption clause in the will had no effect, and concluded (at paras 44 and 45):

I find that the overall evidence clearly establishes that she received property following a transfer of the residence without consideration from her brother, and that the four criteria set out in Livingston … have been met.

…[I]f she had obtained a clearance certificate prior to the transfer of her brother’s undivided share (which had been done for {her late mother’s] succession), she would have known of the tax debt and could have acted accordingly.

Smith J adverted (at para. 41) to the fact that, technically, the taxpayer could have been assessed by each of CRA and the ARQ under s. 160 and its Quebec equivalent so that, depending on the numbers, she could have been assessed for taxes equalling double the value of her brother’s property transferred to her. However, such double taxation did not arise here as CRA only assessed for the difference between the value of the property received by her and the amount she paid to the ARQ.

McDonald v. The Queen, 2015 DTC 1106, 2015 TCC 73

Holding funds in trust no defence for hiding partner’s assets from CRA

The taxpayer cohabitated with the tax debtor. The tax debtor transferred money to the taxpayer, which she deposited in a bank account opened for this purpose. She was given no consideration for the funds. At the time, the appellant was aware that the taxpayer was having “issues” with CRA; the taxpayer had worked as an independent contractor and had failed to pay any tax from his business and had failed to file tax returns for several years.

Rip J. stated (at paras. 25):

It is obvious from reading subsection 160(1) that the purpose of Parliament enacting subsection 160(1) was to prevent a transferor indebted to the Crown from hiding his or her assets from the Crown.

In dismissing the appeal, Rip J. further commented (at para. 28):

Ms. McDonald knew full well that Mr. Chapman had “issues” with the CRA and cooperated with him to assist him to hide his funds from the CRA by opening a bank account in her name to hold the money. … That she may have held the funds in trust for Mr. Chapman does not assist her: subsection 160(1) is rather specific on this point.

M. Soutar Decor 2000 Ltd. v. The Queen, 2016 TCC 62 (Informal Procedure)

transfer from guarantor by virtue of seizure of security by tax debtor’s bank

A line of credit initially provided in 2001 by a bank to the taxpayer (“Soutar Décor”) was guaranteed by the father (“Ronald”) of Soutar Décor’s shareholder, with the guarantee initially secured by a registered charge on Ronald’s house and, from 2002 onwards, also by a GIC (the “GIC Deposit”) of Ronald. At Ronald’s death in February, 2007 he owed a “Tax Debt” of approximately $20,000.). On June 26, 2007, the bank realized upon the GIC Deposit and applied its $75,000 balance against Soutar Co.’s outstanding indebtedness under the line of credit.

Soutar Décor’s submitted that for s. 160 purposes there was a transfer of property by Ronald to Soutar Décor in 2001 (when he had no tax debt) rather than on June 26, 2007. Bocock J. stated (at para. 17):

A guarantee and delivery or pledge of security to a bank does not constitute a transfer because the pledged security remains the guarantor’s: Linke v. Her Majesty The Queen, [1992] T.C.J. No. 669 at paragraphs 3 and 5. Until a guarantee is demanded and the security is converted, the guarantee remains contingent and unenforced: MacLeod v. Her Majesty The Queen, 2012 TCC 379 at paragraph 17. After the June 2007 deposit into transferee, Soutar Décor’s bank account, Soutar Décor then received legal and beneficial ownership. This constituted both the moment and consummation of the transfer: MacLeod [2012 TCC 37] at paragraphs 19 and 20. It is at this time of seizure, realization and payment of the GIC Deposit proceeds that the benefit is conferred and completed. Concerning the intention of Ronald or Soutar Décor as to timing, actions or effect, section 160 is clear: intention is of no import beyond gauging the adequacy of consideration: Wannan v. Canada, 2003 FCA 423 at paragraph 3…

Locations of other summaries Wordcount
Tax Topics - General Concepts - Payment & Receipt seizure of a guarantor’s security constituted a transfer 44

Lupien v. The Queen, 2016 CCI 2

double application of s. 160 re asset sale for excess consideration

Shortly before a corporation (“Antoni”) sold all its assets to a third party, it acquired all the assets of a corporation (“LCR”) owned by its shareholder’s brother, which had been distributing one of its imported product lines in North America. Lamarre ACJ found that the assets so acquired from LCR did not include any valuable goodwill, so that the consideration paid by Antoni was inflated. Accordingly, s.160 applied to make LCR liable for Antoni’s unpaid taxes (jointly with LCR’s shareholder given subsequent dividends to him by LCR).

Locations of other summaries Wordcount
Tax Topics - General Concepts - Fair Market Value - Other distributor earning significant relative profits had no transferable goodwill where no evidence of long-term distributorship agreement 218

Kuchta v. The Queen, 2015 DTC 1229 [at 1509], 2015 TCC 289

widow was "spouse"

The taxpayer was the sole designated beneficiary of two RRSPs held by her husband at his death in 2007. When his estate failed to pay an assessment respecting his 2006 year, the Minister assessed the taxpayer for the same amount under s. 160(1). In finding that this transfer after her husband’s death constituted a transfer to the deceased’s spouse (so that the s. 160(1) assessment was valid), Graham J noted that

  • although dictionary definitions and the legal meaning of spouse “clearly contemplate a relationship between two living people” (para. 22), “people routinely use the word ‘spouse’ to refer to the surviving member of a coupled” (at para. 23),
  • some (but not all) provisions referred to “spouse” to mean a widow or widower (ss. 146(8.91) and 70(6)) or to be inclusive of widows and widowers (ss. 72(2) and 148(8.2)), and
  • the alternative interpretation “would absurdly provide relief only to those individuals whose spouses had failed to comply with the tax system during their lifetimes” - and given that “transfers of property to widows and widowers under a will are clearly caught by subsection 160(1)” (para. 74), such a system would “irrationally…only provide relief if a tax debtor had a RRSP” (para. 72).

He noted that using the colloquial meaning of "spouse" was not necessarily transferable to other provisions with a different context and purpose (para. 79).

Words and Phrases

Strachan v. The Queen, 2014 DTC 1025 [at 2645], 2013 TCC 362

shares issued from spouse's private corporation

The taxpayer was issued shares from her husband's private corporation ("Northside"), in an amount that gave her approximately 98% of the stake in the corporation. Rip CJ found that this was a transfer "in any manner whatever" to the taxpayer from her husband, for the purposes of s. 160(1). After citing Kieboom, he stated (at para. 38):

[Mr. Strachan] ... divested himself of the rights attached to his shares in the same [98%] proportion (i.e. his right to vote as sole shareholder, to receive 100 percent of the dividends should they be declared and to receive all the remaining property of the corporation on dissolution). The fact that Mr. Strachan accomplished the transfer of shares to the appellant by causing Northside to issue them should make no difference.

Locations of other summaries Wordcount
Tax Topics - General Concepts - Ownership beneficial ownership of dividends 70

Mignardi v. The Queen, [2013] GSTC 39, 2013 TCC 67 (Informal Procedure)

onus on Minister where taxpayer had no financial involvement

The Minister assessed the appellant for director's liability in respect of a corporation that had not remitted net tax for reporting periods ending on and after July 1, 2000. The appellant had been excluded by the franchisor of the corporation's business from any input into the financial affairs of the corporation after October 2001, and from any involvement at all after July 2002. The applicant had no access to the corporation's records, and CRA would not provide any background as to how it had computed the corporation's liability. Paris J found that this was sufficient to shift onto the Minister the burden of proving the correctness of the corporation's assessment, and that this burden had not been discharged.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 323 - Subsection 323(1) onus on Minister where taxpayer had no financial involvement 114
Tax Topics - Excise Tax Act - Section 323 - Subsection 323(3) failure to monitor other director 71
Tax Topics - Excise Tax Act - Section 323 - Subsection 323(5) no constructive resignation 63
Tax Topics - General Concepts - Onus onus on Minister where taxpayer had no financial involvement 114

Kiperchuk v. The Queen, 2013 DTC 1088 [at 486], 2013 TCC 60

The taxpayer was the designated beneficiary of her husband's RRSP, and received the RRSP proceeds upon his death, and was assessed for his unpaid taxes under s. 160. Lamarre J found that the taxpayer and her husband were not related persons under s. 251(1)(a) at the time of transfer because their marriage was dissolved on the husband's death, so that at the time of transfer they were not related by marriage under s. 251(2)(a). The taxpayer and her husband also were not related under s. 251(1)(b), because the RRSP devolved to the taxpayer directly by operation of Ontario's Succession Law Reform Act, rather than forming part of the husband's estate.

In response to a submission of the Crown that the taxpayer was factually not at arm's length with her deceased husband because the relevant time was that at which she was designated as his RRSP's beneficiary, Lamarre J stated (at para. 29) that there was nothing in the wording of s. 160(1):

that relates the relationship between the transferor and the transferee to any moment other than that of the transfer of the property (or a moment after the transfer in a case where the transferee has since become the transferor's spouse. The subsection refers throughout to the act of transferring and the time of the transfer, without specifying that other moments in time, previous to the transfer, could be contemplated for the purpose of its application to the transferee.

As the transfer to the taxpayer at arm's length, s. 160(1) did not apply.

Martin v. The Queen, 2013 DTC 1061 [at 325], 2013 TCC 38

Boyle J found that the taxpayer's husband had a substantial accrued debt to the taxpayer relating to unpaid overtime from his medical practice business, and unpaid rent for his use of her property in the practice. This debt exceeded the amounts transferred to her from her husband, and thus offset any possible liability she would otherwise have had under s. 160 in respect of her husband's tax debt.

Brauer v. The Queen, 2013 DTC 1014 [at 74], 2012 TCC 382

The taxpayer's son had a tax debt when he deposited his pay cheques to her bank account, which he later withdrew in full. Bocock J found that the deposits were a transfer for the purposes of s. 160(1), and that the undertaking and understanding that the taxpayer would not access the deposited funds did not represent valuable consideration: "her mere moral obligation not to access the funds does not create a recognizable legal prohibition from doing so" (para. 13). Consequently, she was liable under s. 160 for the amount of the funds deposited to her account.

MacLeod v. The Queen, 2013 DTC 1010 [at 60], 2012 TCC 379

The taxpayer held the matrimonial home. Her husband accumulated a tax debt for several years while he deposited amounts into the taxpayer's bank account which she used to pay the mortgage. V.A. Miller J. dismissed the taxpayer's contention that no transfer of funds had taken place. She could not be a "mere conduit" for her husband's mortgage payments because she was the only mortgagor named on the mortgage, and he was only a guarantor whose guarantee had not been called by the bank. Moreover, a deposit of funds into an account constitutes a transfer (Livingston).

Sokolowski Romar v. The Queen, 2013 DTC 1003 [at 24], 2012 TCC 104

Angers J. found the taxpayer liable for the value of the family residence transferred from her husband, whose tax debt was approximately $900,000. The taxpayer contended that she paid valuable consideration pursuant to a "deed of partition," dated 20 April 1989, to change the distribution of their property between them under the "change of matrimonial regime" provisions under the Civil Code. However, the house was transferred under a separate deed of sale dated 30 June 1988, under which the taxpayer was to pay $1 and "other good and valuable consideration."

In rejecting the taxpayer's contention, Angers J. found that:

  • the deed of sale was not part of any matrimonial regime, given inter alia that it contained a provision that specifically denied that there was a matrimonial regime;
  • the consideration was not fixed at the time of transfer; and
  • no consideration was in fact paid, and no change in matrimonial regime took place.

Nandakumar v. The Queen, 2012 DTC 1279 [at 3827], 2012 TCC 338

The taxpayer received $765,350 in real properties from his father, who had a tax debt of $4,225,985. Bocock J. found that the taxpayer's claim that he had paid consideration in the form of loans to his father and related persons was dubious. Among the reasons listed were that the taxpayer did not have the capacity to lend in the purported amount, and the lack of any evidence of the loans beyond the taxpayer's own testimony.

Lapierre v. The Queen, 2013 DTC 1090 [at 495], 2012 TCC 299

The taxpayer's tax-indebted father gave her $120,000. Angers J. accepted her position that $110,000 of that amount was meant to benefit the taxpayer's sister and her father's business corporation, so her liability under s. 160(1) was limited to $10,000.

Bragg-Smith v. The Queen, 2012 DTC 1227 [at 3628], 2012 TCC 252

The taxpayer held an account in the name of her father's business. The father owed approximately $500,000 in taxes. He bought some germanium-rich waste for $31,762.50, and sold it for two payments of $43,200 and $24.817.74. He had the customer make the first payment into the taxpayer's account, and three days later she paid $31,762.50 to the supplier.

The taxpayer claimed that she had an enforceable verbal agreement to make the $31,762.50 payment, and therefore her $43,200 liability under s. 160(1) should be reduced by $31,762.50 of consideration. Hogan J. found this claim to be credible. The payments into and out of the account concerned the purchase and sale of the same germanium waste, and the two payments were made within three days of each other. It was a "reasonable inference" to find an enforceable verbal agreement, rather than the mere "moral obligation" contended by the Minister.

Hennig v. The Queen, 2012 DTC 1152 [at 3353], 2012 TCC 141 (Informal Procedure)

The taxpayer was unsuccessful in arguing that the limitations period could shield her from liability under s. 160(1), in respect of a dividend received from her wholly owned tax-indebted corporation. Section 160 does not have a limitations period.

Leclair v. The Queen, 2011 DTC 1328 [at 1859], 2011 TCC 323

The taxpayer's father transferred real property to her in June 2006 without her knowledge. She discovered the transfer in December 2008 and transferred the property back on 26 February 2009 after obtaining legal advice. Angers J. found that the taxpayer was not liable under s. 160 for her father's unpaid taxes. The common law on property provides that an unwitting recipient of a gift can, as the taxpayer had done, repudiate the gift retroactively (para. 16). There had therefore been no transfer of property, and hence no liability under s. 160. Angers J. also noted that the Court of Appeal's obiter dictum in Biderman, that a failed testamentary gift could not give rise to s. 160 liability, extended to inter vivos gifts (para. 19).

Locations of other summaries Wordcount
Tax Topics - General Concepts - Ownership retroactive repudiation of gift 84

Lacroix v. The Queen, 2011 DTC 1167 [at 919], 2011 TCC 111

The taxpayer's brother, who was insolvent and facing a large tax debt, deposited $15,000 into a bank account of the taxpayer. The brother periodically withdrew from the account to pay for living expenses. Tardif J. found that, while the sister was apparently not aware that she was participating in a scheme to conceal assets from collection (she did not inquire), she was nevertheless liable under s. 160(1).

The taxpayer argued that she held the funds in the capacity of mandatary (the Quebec equivalent of agent). While Tardif J. found that no such relationship was present, he stated at para. 40 that a transfer of property from mandor to mandatary is not a transfer for the purposes of s. 160, as such a transfer does not divest the mandator of ownership of the property transferred.

De Sanctis v. The Queen, 2010 DTC 1102 [at 3032], 2010 TCC 118

The taxpayers lived together with their father in a condominium which he had purchased but title to which he conveyed to them. Bonner J. found that the contributions of the taxpayers to the shared costs of running the household were unrelated to the transfer to them of the condominium and, therefore, did not represent consideration for the transfer.

Nguyen v. The Queen, 2011 DTC 1059 [at 324], 2010 TCC 503

The taxpayers were the wife and children of a man who died intestate and insolvent, with a tax debt of approximately $270,000. The taxpayers deposited the proceeds from two life insurance policies (which were payable to designated beneficiaries rather than to the estate) into an account in the estate's name. Angers J. found at para. 41 that this labeling of the account was a mistake and that the money deposited to the account was not part of the estate. Consequently, withdrawals made from that account were not a "property transfer" under s. 160.

Gagnon v. The Queen, 2011 DTC 1030 [at 128], 2010 TCC 482

see also Richard v. The Queen, 2011 DTC 1114 [at 614], 2011 TCC 136)

The taxpayer's common-law partner, who owed tax, transferred to the taxpayer his 50% interest in the house they shared, but reserved a right to use the house. By operation of s. 160, the taxpayer became jointly liable for tax the partner owed at the time of transfer. In determining the amount under s. 160(1)(e), Archambault J. found that "the amount the transferor is liable to pay in respect of the taxation year in which the property was transferred" under s. 160(1)(e)(ii) did not exclude the interest that accrued to the transferor after the taxation year in question, stating at para. 19 that "Parliament clearly intended, by adding the words 'or in respect of', not to impose any such limit."

Archambault J. pointed out at paras. 27-28 that the taxpayer's liability was not a distinct tax debt, so no interest accrued on her liability beyond the interest accruing to the transferor.

Crischuk v. The Queen, 2010 DTC 1184 [at 3427], 2010 TCC 276

Sums which the taxpayer's husband transferred to their joint bank account in order to make payments on a mortgage was secured on the family home, which is owned by the taxpayer, and to make payments on vehicle leases registered to the taxpayer, constituted transfers of property to her for purposes of s. 160(1).

Submissions made that full consideration was given in the form of the taxpayer's legal entitlement to be supported by her husband, and the use by her husband of a room in the home as an office, were inconsistent with the Yates decision. Furthermore, although the taxpayer performed household chores, these "were more in the nature of a donation rather than as consideration for the property transferred" [para. 26].

Clause v. The Queen, 2010 DTC 1298 [at 4069], 2010 TCC 410 (Informal Procedure)

Facing insolvency, the taxpayer's husband made a proposal in 2003, under the Bankruptcy and Insolvency Act, providing for monthly payments to his creditors. The creditors, including the CRA, agreed. The husband transferred a house to the taxpayer, and subsequently defaulted on the BIA agreement. The creditors, including the CRA, agreed to a second proposal which effectively picked up where the first proposal left off.

Boyle J. found that, while the second proposal was intended as a continuation of the first, it was nevertheless a distinct proposal. Accordingly, when the taxpayer's husband defaulted on the first agreement, he was again liable to the CRA for taxes owing. By operation of s. 160(1), the taxpayer became jointly and severally liable with her husband for all the taxes owing, and her liability was not later canceled by the second BIA agreement with the CRA.

Provost v. The Queen, 2010 DTC 1009 [at 2574], 2009 TCC 585

In response to a submission of the taxpayer (para. 8) "that subsection 160(1) ... does not include interest" McArthur, J. stated that "with respect to interest, it is true that this section does not apply to interest, but the deeming provisions in the Regulations to the Act clearly state that interest is included in section 160 for transfers".

Leblanc v. The Queen, 2008 DTC 4902, 2008 TCC 242

The taxpayer acquired the family home in consideration for payment by way of set-off against the amount of a loan that she had made to her husband and her assumption of the mortgage on the property. However, in fact, the mortgage payments continued to be made by her husband. In finding that there had been adequate consideration for s. 160(1) purposes, it was noted that the taxpayer had provided her husband with equivalent consideration by covering other family expenses.

Siracusa v. The Queen, 2003 DTC 2106, 2003 TCC 941

The taxpayer, who owned one-third of the shares of a corporation that paid a dividend to its shareholders, and was a director and bookkeeper of the corporation, was found not be acting in concert with the other two directors (who were the remaining shareholders) when the directors with her assent declared and paid a dividend given that the other two directors largely ignored her when they were not in conflict with her. Accordingly, there was no common mind amongst the three directors. S.160(1) did not apply to the payment of the dividend to the taxpayer.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 251 - Subsection 251(1) - Paragraph 251(1)(c) no acting in concert if ignored 82

Jurak v. The Queen, 2003 DTC 557 (TCC)

A company ("Snazz") paid a dividend to a company ("151041") with which it did not deal at arm's length. 151041, which did not deal at arm's length with the taxpayer, sold a house to the taxpayer for a sale price lower than the home's fair market value. In finding that a portion of the tax liability of Snazz could be assessed against the taxpayer under s. 160, Lamarre Proulx T.C.J. found (at p. 562) that "the transferee may himself become a transferor subject to subsection 160(1) of the Act if, at the time of the second transfer, he himself is a tax debtor liable either on his own account or jointly and severally with the first transferor"; and that the tax liabilities that may be transferred under s. 160 include those that have not yet been reflected in an assessment given that "it is a recognized principle in tax law that it is not the assessment that creates a tax liability, but the application of the Act".

Fallis v. The Queen, 2002 DTC 1242 (TCC)

Following an assessment of the taxpayer under s. 160 she alleged that there had been a transfer of a one-half interest in a property to her from her husband in the summer of 1991 when there was a discussion between them that she should receive the equity in the property rather than, as alleged by the Crown, three years later when, on a sale of the property, the husband signed a direction authorizing the purchaser to pay the closing proceeds to her. McArthur T.C.J. stated (at p. 1244):

"It takes more than an intention or uncertain conversation to transfer an interest in real estate. The law of contract requires a clear statement of transfer, acceptance and delivery."

Locations of other summaries Wordcount
Tax Topics - General Concepts - Effective Date 116

Cox v. The Queen, 96 DTC 1690 (TCC)

The fact that a transfer of property from the taxpayer's spouse to the taxpayer was void against the trustee in bankruptcy of the spouse did not prevent the application of s. 160(1) to the taxpayer given that the proper interpretation of the Bankruptcy Act was that the trustee had to do something to render the transaction void, which did not occur.

Locations of other summaries Wordcount
Tax Topics - General Concepts - Illegality 60

Caplan v. The Queen, 95 DTC 709 (TCC)

bankruptcy order of discharge retroactively released transferor of tax liability

The taxpayer's husband contributed $5,500 to her RRSP on March 1, 1986. Her husband's income tax liability for his 1986 taxation year and preceding years would prove to be in excess of $43,000.

In finding that an absolute discharge received by the taxpayer's husband on January 25, 1989, releasing the husband from all claims provable on bankruptcy, eliminated any liability of the taxpayer under s. 160(1), Bell TCJ. noted (following Simard-Beaudry) that the taxpayer's husband was liable for taxes in respect of his 1986 year at the time of the March 1, 1986 transfer even though he had not yet been assessed, and also noted that s. 160 now spoke in the present tense (the transferor "is liable to pay"), with the result that subsequent elimination of the husband's liability eliminated the taxpayer's liability.

Delisle v. The Queen, 95 DTC 650 (TCC)

Funds that the taxpayer's son had transferred into a dormant bank account of the taxpayer were held by her as agent for her son, with the result that there had not been a "transfer" for purposes of s. 160(1), i.e., "to convey or make over (title, right or property) by deed or legal process".

Words and Phrases

Acton v. The Queen, 95 DTC 107 (TCC)

The taxpayer was not liable under s. 160(1) in respect of a cash transfer of $9,100 made to her by her husband because a prima facie case has been established that non-capital losses of her husband that Revenue Canada had neglected to carry back to the taxation year in question would have eliminated the tax liability to which the s. 160 reassessment related, and because it was established that the payment represented a repayment of funds arising from the sale of the taxpayer's interest in the matrimonial home which had been invested by her husband in certain mutual funds before they were sold.

Montreuil v. The Queen, 95 DTC 138 (TCC)

The appellant received a bequest under the will of his father, who died in the Cayman Islands while owing tax and interest to Revenue Canada. In finding that s. 160(1) applied to the appellant, Dussault TCJ. rejected submissions that s. 160 required an intention to evade tax obligations on the part of the transferor and that s. 160 did not apply to transfers by operation of law and not as a result of a positive act of a taxpayer. Dussault TCJ. stated (p. 138) that "transferring does not necessarily imply a positive act by the transferor and neither does it require that a specific action be performed when alive."

Although the transfer occurred when the appellant's father died rather than when the bequest was paid, the appellant was liable for interest that accrued after the date of death (until the total reached the sum bequested by him): interest that compounds until full payment of an amount owing for a specified taxation year that has transpired prior to the transfer constitutes an amount that the transferor (in this case, the deceased) is required to pay under the Act "in respect of" that preceding taxation year.

Words and Phrases

Davis v. The Queen, 94 D.T.C 1934 (TCC)

At the beginning of its 1985 and 1986 calendar taxation years, a corporation declared a dividend to its two shareholders (husband and wife). Such dividends were paid by monthly "draws". McArthur TCJ. found that at the time of declaration of the dividends, the shareholders (who received only a nominal salary from the corporation) had committed their future services to the benefit of the corporation's business and that in fact the dividends were not paid until the services were rendered. Accordingly, the dividends were paid for valuable consideration, with the result that s. 160(1) did not apply.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 160 - Subsection 160(2) 49

Savoie v. The Queen, 93 DTC 552 (TCC)

It was found that the taxpayer had a 50% interest in property transferred to her by her husband on the basis of there being either a resulting trust or constructive trust in relation to such property. Accordingly, s. 160(1) applied only to the beneficial interest in the property that was transferred to her by her husband.

Algoa Trust v. The Queen, 93 DTC 405 (TCC)

stock dividend not a transfer

After finding that s. 160(1) applied to a cash dividend paid by a private corporation to its shareholder, Rip J. went on to find that s. 160(1) did not apply to a stock dividend given that the issue of shares is not a "transfer" because the corporation has not divested itself of its property, and given that there is no transfer of property when a dividend is declared by the directors, as the funds represented by the dividend are under the control of the corporation until the corporation pays the dividend.

Words and Phrases

Groupe d'Investissement Savoie, Lavoie Inc. v. M.N.R., 92 DTC 1531 (TCC)

The taxpayer acquired the personal residence of a related individual in consideration for issuing non-voting preference shares which were redeemable by the taxpayer but not retractable by the individual. In finding that the shares had no fair market value for purposes of s. 160, Dussault J. stated (p. 1541):

"The restrictions encumbering the preferred shares and the absence of control thus prevented anyone, including anyone who were to seize all of the shares held by Mr. Pierre Savoie [the individual], from recovering any value whatever in respect of the property transferred to [the taxpayer], since the redeeming of class G shares received in consideration could not have been obtained by a holder who did not have legal control, whether direct or indirect."

Locations of other summaries Wordcount
Tax Topics - General Concepts - Fair Market Value - Shares 120

Winsor v. MNR, 91 DTC 1170 (TCC)

In finding that the appellant could be assessed under s. 160 respecting the alleged "transfer" to her by her husband of a 1/2 interest in the matrimonial home notwithstanding a subsequent judgment that the conveyance was void pursuant to the Fraudulent Conveyances Act (Newfoundland), Rip J. applied authority "that a conveyance that is fraudulent and void as against creditors is not absolutely void but voidable and is good as between the parties to it" (p. 1172).

Administrative Policy

16 August 2017 Internal T.I. 2015-0622751I7 - Part XIII Tax on Benefit to Non-resident

use of s. 160 to collect s. 15(9) liability of indirect FA on dividends paid to Canco

Using funds generated from operations, Opco, which is a foreign affiliate both of its parent (Canco) and grandparent (Can Holdco ), subscribes for equity of Finco (another FA of Canco) which, in turn, makes a non-interest bearing loan to Foreign Sub, which is a direct subsidiary of the parent of Can Holdco (Foreign Parent). As this loan is repaid within two years, s. 90(6) does not apply to the loan. Did the interest-free loan generate Part XIII tax and, if so, who had the obligation to collect and remit the tax – and how could it be collected? After finding that s. 15(9) and s. 215(1) imposed a liability on Finco for having failed to remit Pt XIII tax on in imputed benefit relating to the absence of interest on the loan, the Directorate then stated:

Opco could potentially be jointly liable to the tax under subsection 160(1) if Finco pays a dividend to Opco in the taxation year in which Finco becomes liable to pay such tax or in a subsequent taxation year, to the extent of the amount of the dividend or the amount of such tax, whichever is the lesser. Similarly, if Opco receives a dividend from Finco and then pays a dividend to Canco in the taxation year in which Opco becomes liable to pay the tax under subsection 160(1) or a later year, then Opco would be considered the “transferor” of the property under subsection 160(1) and Canco, as the transferee of the property, would be jointly liable to the tax with Opco, to the extent of the amount of the dividend or the amount of the tax, whichever is the lesser.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 15 - Subsection 15(9) s. 15(9) applies to interest-free loan between two foreign affiliates 257
Tax Topics - Income Tax Act - Section 215 - Subsection 215(1) CFA liable for failure to "withhold" and remit Pt XIII tax on interest-free benefit on loan to NR sister of its Cdn grandparent 122
Tax Topics - Income Tax Act - Section 227.1 - Subsection 227.1(1) s. 227.1 liability can extend to NR directors of a CFA 168
Tax Topics - Income Tax Act - Section 214 - Subsection 214(3) - Paragraph 214(3)(a) benefit from interest free loan by CFA to Canco sister deemed to be a dividend subject to Pt XIII tax 160
Tax Topics - Income Tax Act - Section 80.4 - Subsection 80.4(2) extra-territorial application of s. 80.4(2) 132

12 June 2012 June STEP Roundtable, 2012-0442681C6 - STEP CRA Roundtable – June 2012 - Question 2

In response to a question as to whether a s. 160 would a apply to a butterfly reorganization (which typically entailed two share redemptions giving rise to deemed dividends), where the reorganization was intended to divide family assets between spouses in a divorce situation, CRA stated:

[I]t would be a question of fact as to whether subsection 160(1) would apply to any of the transfers of property that would form part of the transactions involved in the reorganization. Subsection 160(1) would not apply to any transfers of property where fair market value consideration is received in return.

Where subsection 160(1) is applicable to a particular situation, an exception may be available in subsection 160(4) in respect of property transferred by a taxpayer to the taxpayer's spouse (or common-law partner) pursuant to a decree, order or judgment of a competent tribunal or pursuant to a written separation agreement if, at the time the property was transferred, the taxpayer and the spouse were living separate and apart as a result of the breakdown of their relationship.

7 October 2011 Roundtable, 2011-0412201C6 F - Art. 160 - dividende en actions suivi d'un rachat

Algoa does not stand for the proposition that s. 160(1) is not applicable to a stock dividend followed by a buyback of the same shares.

14 September 1995 T.I. 9520635 ( "Liability of Joint Tenant for Deceased's Taxes")

S.160(1) will not apply to make a surviving joint tenant liable for the taxes owing by the estate of the other joint tenant arising on the deemed disposition under s. 70(5). CRA stated:

It is settled law that each joint tenant has an identical interest in the whole property and every part of it and that the joint tenants have the right of survivorship in respect of such property. Accordingly, while subsection 70(5) of the Act creates a deemed disposition of the deceased's property for income tax purposes, no actual transfer of property takes place in order to enlarge the interest of the surviving joint tenant. Thus, in the circumstances described and provided that no action has occurred prior to death which would have severed the joint tenancy and created a tenancy in common, it is our view that subsection 160(1) of the Act would not impose a joint liability on the nephew by reason of the nephew's sole ownership of the property previously held in joint tenancy.

Income Tax Technical News, No. 4, 20 February 1995

Notwithstanding that the decision in the Davis case (94 DTC 1934, [1994] 2 CTC 2033) was not appealed by RC, it does not interpret s. 160 as containing a solvency test (i.e., the transferor of property does not have to be insolvent for the provision to be operable), and RC further is of the view that dividends are not normally issued for consideration.

1994 A.P.F.F. Round Table, Q. 23

In response to a question concerning the Algoa Trust case (93 DTC 405), RC stated that it "has issued no general directives on restricting the application of subsection 160(1) following the payment of dividends and intends to apply the provisions of the subsection whenever the circumstances so require".

September 1991 Memorandum (Tax Window, No. 9, p. 18, ¶1458)

S.160 is not limited to Part I and may apply to taxes imposed under other Parts.

The payment of a dividend may constitute a transfer of property for purposes of s. 160.


Bruce Sinclair, "Current Topics in the Taxation of Real Estate Development", 2014 Conference Report, (Canadian Tax Foundation), 12:1-24.

Sale of Projectco before allocation to it by sub LP of condo sale profits (pp. 12:2-3)

Developers often undertake projects in a single-purpose entity ("Projectco") for commercial reasons.…A further level of liability protection can be provided if the project is held in a limited partnership…

[T]he developer will sell the shares of Projectco to another party that has the ability to reduce or shelter the income that will be allocated at the end of the fiscal period of the limited partnership following the sale of the Projectco shares. The sale will take place after the project has been completed and sold, but before profit has been allocated or distributed by the partnership. Typically, the profit will be held by the partnership in the form of cash or a loan to the developer or a related party….

[T]he purchase price for the Projectco shares will exceed the amount by which the value of the assets exceeds the liabilities and the full amount of the latent tax liability of Projectco….

Use of stock dividends to minimize gain to developer (p.12:3-4)

Whether this gain [on the sale of Projectco] is on income or capital account…the developer will seek to minimize [it]…by payment of one or more stock dividends by Projectco in an aggregate amount that will be equal to the purchase price of the Projectco shares less the adjusted cost base (ACB) of the shares, which is assumed to be minimal.

[T]he developer will take the position that the capital gain that would otherwise be realized on the sale of the shares of Projectco at fair market value is attributable to income earned prior to the "safe-income determination time"…

CRA s. 160 challenges to Projectco transactions (p. 12:13)

[T]he manner in which the purchase price is funded could affect the developer's exposure to a challenge to the transaction under section 160 on the basis that property of Projectco has been transferred to the developer for consideration that is less than its fair market value. This is an indirect basis upon which the CRA, has challenged similar transactions. [fn 18: See the Amended Notice of Appeal (filed on February 18, 2014) and the Reply to Amended Notice of Appeal (filed on February 28,2014) in 594710 British Columbia Ltd. v. The Queen, docket no. 2013-4033(IT)G (TCC).]… the discussion considers the developer's position on the basis that Projectco is liable to pay tax on the income allocated from the partnership, and it is this liability that underlies a derivative assessment against the developer under section 160.

Hurdles to a successful s. 160 challenge (pp. 12:13-14)

[H]urdles include the following determinations:

  • whether the payment of the stock dividend constitutes a transfer of property;
  • whether the developer and the acquiror deal at arm's length;
  • whether the sale of the Projectco shares constitutes a direct or indirect transfer of property by Projectco to the developer for consideration that is less than fair market value; and
  • depending upon the timing of the taxation year-ends of Projectco following its acquisition of control by the acquiror, whether Projectco has a tax liability in a taxation year in which property may be considered to be transferred to the developer.

It is clear that the payment of a stock dividend does not constitute a transfer of property…[a]s… stated in Algoa Trust… .

Indirect transfer of property (p. 12:15)

[A]s stated by the Federal Court of Appeal in Medland, "[the words ' other means' in subsection 160(1) of the Act refer to any circuitous way in which property of any kind passes from one person to another." [fn 22: … 98 DTC 6358, at paragraph 20…] Applying such a broad interpretation, a court could find that property of Projectco has been transferred indirectly to the developer. In fact, Medland also stands for the proposition that a reduction of a liability of a non-arm's-length person owed to a taxpayer is a transfer of property. So a reduction of a liability of the developer to Projectco (for example, by way of a loan from Projectco to the developer) as a consequence of the proposed transactions could be considered to be a transfer of property….

Double application of GAAR in 594710 case (p. 12:16)

[I]n a case currently before the Tax Court, [fn 23: 594710 British Columbia Ltd. supra note 18] the CRA has taken the position that section 160 applies to the developer by virtue of the application of GAAR. In fact, the CRA is arguing for a double application of GAAR: in the first instance, to create a tax liability in Projectco; and then to create a derivative liability in the developer based on an abuse of the provisions of the Act having regard to section 160. The CRA's basis for the application of GAAR is that the policy behind section 160 is to "prevent a taxpayer from avoiding a liability under the Act by transferring property to a non-arm's-length person for inadequate consideration." The problem with this characterization of the policy is that it does not reflect the manner in which subsection 160(1) applies. The provision actually looks not at the consideration received by the transferor, but at the consideration paid by the transferee….

Bleiwas, "Defenses to Assessments Under Section 160 of the Income Tax Act", Tax Litigation, Vol. V, No. 1, 1996, p. 291.

Thivierge, "Emerging Income Tax Issues: Substance Over Form Revisited, Section 160 of the Income Tax Act, and Series of Transactions", 1993 Conference Report, c. 4

Fien, "A Directors' Liability and Indemnifications, Section 160 Assessments and Ordinary Course of Business Provisions", 1992 Conference Report, pp.53:27-53:31.

Subsection 160(2) - Assessment

See Also

Davis v. The Queen, 94 D.T.C 1934 (TCC)

After comparing the wording of ss.160(2) and 152(1), McArthur TCJ. stated (p. 1935):

"... I am satisfied that the words 'at any time' provide a freedom to assess without the restrictions of '... with all due dispatch' regardless of the lapse of time since the assessment at issue is an original assessment."

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 160 - Subsection 160(1) 93

Administrative Policy

5 October 2012 APFF Roundtable, 2012-0454241C6 F - Double imposition

ETA s. 325 assessment in same audit is issued after ITA s. 160 to avoid double tax/no priority accorded to ARQ

A, who is indebted to each of CRA and Revenue Quebec (ARQ) for $50,000, transfers $10,000 of property to A's spouse (B) for no consideration. In response to a question as to whether CRA would reduce its assessment of B under s. 160 by the amount of the assessment made by ARQ under the equivalent Quebec provision, CRA stated that it did not have a policy to make such reduction, stating (TaxInterpretations translation):

In making an assessment by virtue of section 160, the Minister cannot make the assessment otherwise than in conformity with the authority conferred under the ITA.

An assessment under ETA s. 325 generally is to be reduced by the amount of the corresponding assessment under ITA s. 160, whereas there is no comparable reduction provision in s. 160 - so that double taxation can be avoided if the ETA assessment is issued second. CRA stated (TaxInterpretations translation):

In the situation where the two assessments are being dealt with at the same time, the administrative policy of the CRA is to issue the assessment under ETA section 325 last.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 325 double taxation from contemporaneous ITA/ETA assessments avoided by ITA assessment being 1st 101

5 July 1994 Memorandum 941434 (C.T.O. "Assessment of a Dissolved Corporation")

Where the time limit provided for in s. 219(2) of the Business Corporations Act (Alberta) has expired, it will be necessary first to revive the dissolved corporation before a shareholder to whom property of the corporation was distributed can be assessed under s. 160(2).

88 C.R. - Q.80

A s. 160 assessment is not a reassessment; therefore, the taxpayer is garrotted without due process of law.

Subsection 160(3.1) - Fair market value of undivided interest or right

See Also

Gagnon v. The Queen, 2011 DTC 1030 [at 128], 2010 TCC 482

The taxpayer's common-law partner, who owed tax, transferred to the taxpayer his 50% interest in the house they shared, but reserved a right to use the house. Archambault J. found (at para. 31) that the reservation meant that taxpayer had not received an undivided interest in a property. Therefore, s. 160(3.1) was not applicable for calculating the fair market value of the transferred interest.

Subsection 160(4) - Special rules re transfer of property to spouse or common-law partner


Fluxgold v. The Queen, 90 DTC 6187 (FCTD)

The exemption in s. 160(4) was available with respect to the transfer of funds by the taxpayer's husband to the taxpayer pursuant to a court order made under the Family Law Reform Act (Ontario), even if the allegation of the Crown, that the taxpayer's husband had obtained the funds in question as a result of a previous misappropriation of property of a corporation controlled by him and the taxpayer, were accepted.

See Also

J.B. v. Agence du revenu du Québec, 2018 QCCQ 4200

unsigned layperson agreement qualified as a “written separation agreement”/husband in basement was separate and apart

The taxpayer`s relationship with her husband broke down in 2007, and in August 2007, her husband took the initiative to prepare in mangled English a written separation agreement that provided that he would transfer his 1/2 co-ownership interest in various of their co-owned properties in satisfaction of his support obligations. For more than a year thereafter he spent much of his time in the basement of their house, in order to ease the transition for their two children (one of them, autistic), in addition to staying with friends and his own family. In May 2008, the taxpayer arranged for the ½ co-ownership interests to be transferred to her. In March 2011, she obtained a divorce decree that confirmed the previous transfer of such properties to her in settlement of her support claims.

In finding that the equivalent of ITA s. 160(4) deemed the properties to have been transferred to the taxpayer for nil consideration, Dortélus J first found that the agreement drafted by the taxpayer’s husband qualified as a “written separation agreement,” even though it was not signed by the taxpayer, given that she had accepted it and they had acted upon it, with its essential terms being confirmed by the divorce judgment. He also found that from August on they had lived “separate and apart” notwithstanding the maintaining by him of a “pied à terre” in the basement for some time.