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: Whether receivers are required to file outstanding returns?
Position: It depends on the facts; each case would need to be evaluated on its own set of circumstances.
Reasons: The application of subsection 150(3) could be triggered if a receiver is appointed to administer, manage, wind up, or control the property or business of the taxpayer; or if the property in the receiver's possession consists of all or substantially all of the property of the taxpayer or that of his or her business.
April 29, 2011
Accounts Receivable Directorate HEADQUARTERS
Income Tax Rulings
Directorate
Attention: Toni Manconi, Director Bob Skulski
Accounts Receivable (613) 957-9767
Tax Programs Division
2011-039513
Receivers' Requirement to File Outstanding Returns
This is further to the query from Art Weston concerning an interpretation of subsection 150(3) of the Income Tax Act and whether the provision would apply where a receiver has been appointed to realize on or recover against a single asset of a taxpayer.
Subsection 150(3) provides as follows:
"Every trustee in bankruptcy, assignee, liquidator, curator, receiver, trustee or committee and every agent or other person administering, managing, winding up, controlling or otherwise dealing with the property, business, estate or income of a person who has not filed a return for a taxation year as required by this section shall file a return in prescribed form of that person's income for that year."
One of the issues raised by the question is whether the actions of the receiver involve "administering, managing, winding up, controlling or otherwise dealing" with the property or business of the taxpayer. The term "otherwise dealing" is very general, but given that it follows a list of specifics, the ejusdem generis rule of interpretation, now referred to as the limited class rule, applies. The rule is cited in Ruth Sullivan, Sullivan on the Construction of Statutes, 5th ed. (Markham: LexisNexis, 2008), at p. 231, as follows:
"... when one finds a clause that sets out a list of specific words followed by a general term, it will normally be appropriate to limit the general term to the genus of the narrow enumeration that precedes it." [citation omitted]
An application of the rule is provided in Pierre-André Côté, The Interpretation of Legislation in Canada, 3rd ed. (Scarborough: Carswell, 2000), where at p. 315, the author offers the following example: "an airplane is not a "vehicle" in the context of the enumeration "automobile, van, truck, or other vehicle" because it is not part of the class of vehicles enumerated."
In order for the provisions of subsection 150(3) to apply, the receiver's dealing needs to be interpreted in the context of administering, managing, winding up or controlling the property or business of the taxpayer. This raises the issue whether the seizure, attachment, liquidation or repossession of a single asset falls within that context.
The question now turns on the meaning of the word "property", which in isolation is a general term. In this regard, the meaning of the word can be determined by the words immediately surrounding it. The noscitur a sociis rule of interpretation, now referred to as the associated words rule, is explained in Sullivan on the Construction of Statutes, supra, where at p. 227 the author explains that the rule
"... is properly invoked when two or more terms linked by "and" or "or" serve an analogous grammatical and logical function within a provision. This parallelism invites the reader to look for a common feature among the terms. This feature is then relied on to resolve ambiguity or limit the scope of the terms."
A good example of the operation of the rule is offered in The Interpretation of Legislation in Canada, supra, where at p. 314, the author examines the word "horn". When read alone, the word is ambiguous in that it can have several meanings, including the curved or pointed outgrowth on the head of cattle; the klaxon affixed to a motor vehicle that serves as a warning signal; or a musical instrument. However, when read in the context of "the trombone, horn, and clarinet", the reference is clearly to a musical instrument.
The word "property" in subsection 150(3) is associated with the words "business, estate or income of a person". In this regard, the context implies something greater than a single isolated asset of a business. For the purposes of the Bankruptcy and insolvency Act, R.S.C. 1985, c. B-3, two definitions of "receiver" are provided in subsection 243(2). The definition in paragraph 243(2)(b) offers some assistance in the interpretation of subsection 150(3). Paragraph 243(2)(b) states in part that a receiver is a person who
"... is appointed to take or takes possession or control - of ALL OR SUBSTANTIALLY ALL of the inventory, accounts receivable or other property of an insolvent person or bankrupt that was acquired for or used in relation to a business carried on by the insolvent person or bankrupt ..." [emphasis added]
Based on the foregoing analysis, it is suggested that the test for determining whether subsection 150(3) applies to a receiver appointed to realize on or recover against a single asset of a taxpayer, has two prongs, either of which could trigger the application of the provision. The receiver must be administering, managing, winding up or controlling the property or business of the taxpayer; alternatively, the property in the possession of the receiver must consist of all or substantially all of the property of the taxpayer or that of his or her business.
The test is by no means ironclad. Take, for instance, the situation where the business of a taxpayer consists of five assets, each of which has been pledged as security to a separate lender. Were each of the lenders to appoint a separate receiver to realize and recover on the security, no one receiver would be dealing with all or substantially all of the property of the business; furthermore, it is possible that no one receiver would be administering, managing, winding up or controlling the property or business of the taxpayer.
These situations are fact driven. In this regard, it is difficult to envisage a single policy statement that would effectively address all the variances. Suffice to say, each case would need to be evaluated on its individual merits and this could very well require legal assistance. Accordingly, it is strongly recommended that you refer this question and the interpretation provided herein for confirmation and comment by Legal Services.
B.J. Skulski
Manager,
Insolvency and Administrative Law Section
Income Tax Rulings Directorate
c.c. Art Weston
Insolvency Section
Accounts Receivable Tax Programs Division
Jean-Marc Raymond
Senior General Counsel
Legal Services
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