HER MAJESTY THE QUEEN,
REASONS FOR JUDGMENT
The issue in this appeal is
whether Signa Hennig was correctly assessed under section 160 of the Income
Tax Act with respect to dividends paid to her from a corporation that had an
outstanding tax debt.
The amount at issue, excluding
interest, is $22,230.02.
On a preliminary matter, at the
opening of the hearing I raised an issue as to whether this matter should be
bumped up from the informal procedure to the general procedure due to the
amount at issue exceeding $12,000. Upon consent of the parties, I directed that
the general procedure apply.
The factual assumptions made by
the Minister of National Revenue in issuing the assessment are reproduced
below. These facts are not in dispute.
13. In determining the Appellant’s tax liability for the tax
liability of the Corporation, the Minister made the following assumptions of
Trucking Ltd (the “Corporation”) was a trucking company;
Appellant’s husband died December 9, 1992;
(c) The Appellant continued to operate the business of the
Corporation for approximately 10 years;
(d) The Appellant was the 100% shareholder in the Corporation
for the fiscal years of March 31, 2001 and March 31, 2002
(e) The Corporation ceased operating in 2002 and a dividend of
$108,000 was paid to the Appellant;
(f) At the time that the Corporation paid the dividend to the
Appellant it was indebted to the Minister for corporate taxes as set out in
attached Schedule A; and
(g) No consideration was provided by the Appellant for the
dividend of $108,000.
The technical requirements to
impose liability under section 160 are satisfied in this case by the
assumptions made by the Minister and which were not challenged by Mrs. Hennig.
Ronald Agar, the accountant for
Mrs. Hennig who represented her at the hearing, submits that the assessment is
statute barred because it was made beyond the three year limitation period.
The respondent submits that the limitation
period has no application to assessments under section 160: Canada v.
Addison & Leyen Ltd.,  2 S.C.R. 793, 2007 SCC 33.
I agree with the respondent on
this issue and would refer to paragraph 9 in Addison & Leyen:
9 Nevertheless, we find that judicial
review was not available on the facts of this case. As Rothstein J.A. pointed
out, the interpretation of s. 160 ITA by the majority of the Federal
Court of Appeal amounted to reading into that provision a limitation period
that was simply not there. The Minister can assess a taxpayer at any time. In
the words of Rothstein J.A.:
While in the sense identified by the
majority, subsection 160(1) may be considered a harsh collection remedy, it is
also narrowly targeted. It only affects transfers of property to persons in
specified relationships or capacities and only when the transfer is for less
than fair market value. Having regard to the application of subsection 160(1)
in specific and limited circumstances, Parliament's intent is not obscure.
Parliament intended that the Minister be able to recover amounts transferred in
these limited circumstances for the purpose of satisfying the tax liability of
the primary taxpayer transferor. The circumstances of such transactions mak[e]
it clear that Parliament intended that there be no applicable limitation period
and no other condition on when the Minister might assess. [para. 92]
Mr. Agar also submits that the
assessment failed to take into account business expenses that were satisfied by
Mrs. Hennig from the dividend.
This argument too must
fail. In order to justify a reduction in the assessment, it must be established
that the dividend was less than the amount assessed. This was not done. I would
also note that Mrs. Hennig was not able to establish that the amount assessed exceeded the portion of the
dividend used for personal purposes.
Mr. Agar also submits that the
assessment should be vacated because the actions of the CRA were unfair.
Mr. Agar testified that he assumed
the Canada Revenue Agency (CRA) agreed to a settlement when they cashed a
cheque pursuant to a settlement offer. It appears that he was mistaken in making
Mr. Agar also submits that the conduct
of the CRA was unfair when they refused to return the money to Mrs. Hennig
after the mistake was discovered. This resulted in interest accruing on money
borrowed to fund the payment. The CRA have also refused an application to waive
Based on the limited evidence
before me, the circumstances in this case appear to be sympathetic. Mrs. Hennig
was left to operate her spouse’s trucking business after he died. She was ill-equipped
to do so and the business suffered as a result. I would also comment that this
is not a case of under-reported income. The return was prepared by a chartered
accountant and the income was reported.
Unfortunately for Mrs.
Hennig, this Court does not have
discretion to vacate an assessment based on grounds of fairness, no
matter how sympathetic the circumstances.
At the hearing, I provided the
parties with a period of time to attempt to settle this matter. As no
settlement was reached, the appeal will have to be dismissed.
Signed at Ottawa, Ontario this 27th day of April 2012.
“J. M. Woods”
CITATION: 2012 TCC 141
COURT FILE NO.: 2011-1225(IT)I
STYLE OF CAUSE: SIGNA HENNIG v. HER MAJESTY THE QUEEN
PLACE OF HEARING: Edmonton,
DATE OF HEARING: December 12, 2011
REASONS FOR JUDGMENT BY: The
Honourable J.M. Woods
DATE OF JUDGMENT: April 27, 2012
Agent for the
Ronald J. Agar
Counsel for the
COUNSEL OF RECORD:
For the Appellant:
Respondent: Myles J. Kirvan
Attorney General of Canada