21 August 1991 Ministerial Correspondence 911974 F - Liability of Directors

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.

Dear Sirs:

Re:  Section 227.1 - Liability of Directors

This is in reply to your letter of June 27, 1991, to the Vancouver District Taxation Office, which has been referred to us for a reply.

You describe a hypothetical situation where a sole shareholder and director of a corporation is required, pursuant to paragraph 227.1(2)(a) of the Income Tax Act (the "Act"), to make certain payments.  As a consequence of severe financial difficulties the corporation has ceased to carry on all of its business and the amounts owing respecting the payments are uncollectible.

Since the payments are required to be made by virtue of section 227.1 of the Act and the debts can not be considered to have been acquired by the director for the purpose of gaining income from a business or property the director's loss respecting the debts would be nil by virtue of paragraph 40(2)(g) of the Act.

There is no administrative relief in respect of either the requirement to make the payments under section 227.1 of the Act or the non-availability of a loss under paragraph 40(2)(g).  In a case of extreme hardship a director may consider a request for remission of tax under the Financial Administration Act.

We trust our comments will be of assistance to you.

Yours truly,

for DirectorBusiness and General DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch

c.c. J.C. Fitz-Clarke Audit Review Vancouver  District Office

    R. Manders Collections Division Collections and Accounting Directorate