Principal Issues: (1) Does an executor have an obligation to file T2 returns for a corporation of which the deceased person was the sole shareholder and director, and if so, what section of the ITA requires this? (2) Can the CRA take action that would make a deceased taxpayer liable for debts owed by the corporation of which he or she was a director? If so, what section of the ITA allows this? (3) If the CRA was to make the deceased taxpayer liable for debts owed, how could the executor object to this? (4) If the CRA was to make the deceased taxpayer liable, can the executor be held liable for these amounts? If so, under what authority under the ITA would this occur?
Position: (1) There is no direct obligation imposed by the Act for the executor to file tax returns on behalf of a corporation of which a deceased person was the sole shareholder and director. (2) Yes. For examples, see sections 227.1 and 160. (3) The executor could challenge the validity of the underlying assessment. (4) If and when distributions are made, the executor will need to obtain a clearance certificate. If he or she does not do so, he or she may be liable for the deceased's tax owing.
Reasons: The determination of the potential liabilities of the executor is a question of fact.