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.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
assessment of a dissolved corporation
corporation must be revived if BCAA time limit has expired
Reasons FOR POSITION TAKEN:
previous positions, analysis of the law
July 5, 1994
Calgary District Office Head Office
Attention: C. Baffa V. Plant
Business Audit (613) 957-8953
Section 441 16
Assessment of a dissolved corporation
This is in reply to your memorandum dated May 30, 1994 in which you ask us some questions about assessing the above corporation.
You have provided the following background information:
You would like us to respond to the following questions:
1)whether it is possible for you to assess the March 31, 1990 tax return and if so, under which section of the Income Tax Act (the "Act") you can assess, and what method you would use to assess the return.
2)whether you are restricted in making an assessment under section 159 or 160 of the Act if the two year limitation of liability of shareholders of dissolved corporations under subsections 219(2) and (4) of the Business Corporations Act of Alberta ("BCAA") has expired? You would like to know who should be assessed after expiration of the two-year period.
3)If you cannot assess due to the expiration of the two-year time limit, then you would like to know whether reviving the corporation under subsection 202(1) of the BCAA would enable you to assess the return under sections 152, 159, or 160 of the Act.
4)If the answer to the third question is yes, then you would like to know whether there are any special instructions to be followed in order for you to revive the corporation.
We have the following specific comments in response to your questions, as well as some general comments concerning dissolved corporations.
5)There is no provision in the Act which allows the Department to assess a dissolved corporation. If the two-year time limit provided for in subsection 219(2) of the BCAA has expired, then there is no way that the dissolved corporation can be assessed. As you mention in your third question, it becomes necessary to revive or restore the dissolved corporation under the relevant corporate statute before it can be assessed or reassessed in accordance with the Act.
6)Sections 201 and 202 of the BCAA provide for the revival of a dissolved corporation. Following revival, the Department can assess or reassess the corporation pursuant to section 152 of the Act. Due to the work involved, revival of a corporation is usually of last resort. Although the shareholders have no liability under subsection 219(4) of the BCAA due to expiry of the two-year time limit, we believe that it may be possible to assess XXXXXXXXXX in his capacity of transferee of property under subsection 160(2) of the Act, given that he was not dealing at arm's length with the corporation. We believe that although XXXXXXXXXX liability as a shareholder under subsection 219(4) of the BCAA has expired, this has no bearing on his liability as non-arm's length transferee of property under subsection 160(2) of the Act. However, the dissolved corporation would first have to be revived and assessed before the shareholder could be assessed under subsection 160(2).
7)Once the corporation has been revived and assessed, since no clearance certificate was obtained pursuant to subsection 159(2) of the Act, it appears that it would be possible to assess the responsible representative, who in this case appears to be XXXXXXXXXX He would be personally liable under subsection 159(3) of the Act to the extent of the value of the property distributed, and may be assessed in the same manner and with the same effect as an assessment made under section 152 of the Act.
8)We suggest you contact Head Office, Audit for procedures to follow in reviving a dissolved corporation.
9)In the case of a corporation that has been dissolved, if the time limit which provides for continuation of actions, such as that of subsection 219(2) of the BCAA has not expired, then the tax return may be assessed without having to revive the corporation. This was confirmed by two recent court cases, 460354 Ontario Inc. (92 DTC 6534) and Hadi Saraf in his Capacity as a Director of 495187 Ontario Limited at the time of its dissolution (94 DTC 6229), both of which involve corporations incorporated under the Ontario Business Corporations Act, where it was held that an assessment is an administrative action and therefore a dissolved corporation may be assessed or reassessed, provided the relevant time limit has not expired. This assessment would be under section 152 of the Act and would be served in the name of the dissolved corporation on the director or other officer of the corporation as last shown in the notices filed under the BCAA, per subsection 219(3) thereof. If the property of the corporation has been distributed to the shareholders, then they are liable for the taxes, interest and penalties of the corporation, but only to the extent of the amount that was distributed to them on the dissolution of the corporation under subsection 219(4) of the BCAA and subject to the two-year time limit to commence such action against the shareholder.
These records are necessary in order to reconstruct the information relevant to each shareholder as distributee of corporate assets and for the tracing and distribution of assets of the corporation, since the onus is on the Department in any action brought under subsection 219(4) of the BCAA to prove the extent of a shareholder's liability, as well as to prove that section 219 of the BCAA applies.
In your particular situation, had the two-year time limit not expired, since there is only one shareholder it would not appear to have been a particularly onerous task to establish the amount of the shareholder's liability for purposes of subsection 219(4) of the BCAA.
We trust you will find our comments helpful.
Reorganizations and Foreign Division
Legislative and Intergovernmental
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