Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Principal Issues: Clarification of the application of subsections 159(2) and 159(3) of the Income Tax Act with respect to IC82-6R9 "Clearance Certificate".
Position: General comments provided.
Reasons: Wording of the Act.
XXXXXXXXXX
2012-046479
Gillian Godson
December 19, 2012
Dear XXXXXXXXXX
Re: Application of 159(2) and 159(3)
We are writing in reply to your email of October 4, 2012 requesting clarification of the information outlined in IC82-6R9 entitled "Clearance Certificate", and the related provisions of the Income Tax Act (the "Act") in subsections 159(2) and 159(3).
As noted in our conversation (XXXXXXXXXX/Godson) of November 7, 2012, we have been advised by the Ottawa Tax Service Office that your client has requested that the Canada Revenue Agency (the "CRA") not communicate with you with respect to any matters concerning their accounts with CRA. As a result our response to your inquiry is limited to the following general comments.
Our Comments
As outlined in paragraph 4 of IC82-6R9, a clearance certificate certifies that all amounts for which the taxpayer is, or can reasonably be expected to become, liable under the Act at or before the time of distribution have been paid, or that the Minister of National Revenue has accepted security for payment. The applicable provision of the Act, which outlines this requirement, is subsection 159(2).
Subsection 159(2) of Act requires that every legal representative responsible for administering, winding-up, controlling or otherwise dealing with the property, business or estate of another person to obtain a certificate from the Minister verifying that all amounts for which the taxpayer is liable under the Act have been paid or acceptable security for payment has been provided, prior to making a distribution of any property over which the representative has control. Therefore, as we discussed, in order for the clearance certificate to be of value to the legal representative the certificate needs to be obtained prior to the distribution of the property.
In that regard, subsection 159(3) of the Act provides that the Minister may assess the legal representative of a taxpayer for the amount of the taxpayer's debt if the legal representative distributes the assets of the taxpayer before obtaining a certificate from the Minister of National Revenue confirming that the taxpayer's tax debts have been paid. A proposed amendment to subsection 159(3), for assessments completed after December 20, 2002, clarifies that the legal representative may also be responsible for any and all interest that is charged as a result of these assessments.
Information with respect to the liability of the legal representative is also provided in IC82-6R9. The IC states at paragraph 5 that in a situation such that the legal representative does not get a clearance certificate before he or she distributes property, he or she is liable for unpaid amounts, whether assessed before or after the actual distribution of property. The legal representative will be personally liable for the taxpayer's debt, up to the value of the property distributed.
We trust these comments will be of assistance.
Yours truly,
Terry Young, CPA, CA
Manager, Administrative Law Section
International Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5
© Her Majesty the Queen in Right of Canada, 2012
Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistributer de l'information, sous quelque forme ou par quelque moyen que ce soit, de facon électronique, méchanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.
© Sa Majesté la Reine du Chef du Canada, 2012