At the time of his bankruptcy, the taxpayer had unpaid income tax assessments of $4.478 million of which$4.424 million were under appeal to the Tax Court of Canada. At issue was whether the full assessed amount qualified as an “amount payable, within the meaning of subsection 223(1) of the Income Tax Act … by an individual,” in which case s. 172.1 of the Bankruptcy and Insolvency Act would have been applicable.
In finding that the taxes under appeal did not so qualify under s. 223(1), Brown JA noted the Attorney General’s arguments that ITA s. 158 deems an assessed amount to thereupon be “payable forthwith,” and s. 152(8) deems an assessment to be “valid and binding,” and stated (at paras. 41, 49-50)
Both ss. 152(8) and 248(2) indicate that until the objection or appeal process is concluded, the amount of tax the Minister can compel a taxpayer to pay cannot be known. The assessed amount can change from time to time by virtue of judicial decisions or new assessments... .
...The restraints placed by ITA s. 225.1 on the enforceability of an assessed amount of tax that is under appeal are strong indicators that a claim based on those amounts would not be provable in a bankruptcy.
Consequently, where amounts of income tax assessed against an individual bankrupt taxpayer remain under appeal at the time of his discharge hearing, the existence of the outstanding appeal entitles the trustee to classify the claim based on the unpaid assessed amounts as a contingent, unprovable one.
He then noted (at para. 63) that
to qualify as “personal income tax debt” within the meaning of s. 172.2(1), the tax debt must be a proven claim.