17 December 2010 Internal T.I. 2010-0380651I7 - Third Party Provisions to Collect Revocation Tax

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 subsection 160(1) or 188(2) can be applied to collect revocation tax.

Position: Both provisions can be applied but the scope of subsection 188(2) is not as wide as the scope of subsection 160(1).

Reasons: Paragraph 160(1) can be used to collect any amount owing under the Act, while subsection 188(2) is limited to collect revocation tax from a person to whom property was transferred 120 days before a charity's deemed year-end.

									December 17, 2010

	Accounts Receivable Tax Programs Division		HEADQUARTERS
									Income Tax Rulings
									  Directorate
	Attention: Ann Morin, Manager				Lindsay Frank
	                 International Section		(613) 948-2227

									2010-038065

Collecting Revocation Tax from Third Parties

This is in reply to an email from Shawn Leduc, who has inquired as to whether subsection 160(1) or 188(2) of the Income Tax Act (the "Act") can be applied to collect revocation tax.

Subsection 188(2) makes a person, who appropriates property from a deregistered charity, jointly and severally or solidarily liable with the charity for revocation tax. For subsection 188(2) to apply, the person must have received property from the charity 120 days before its deemed year-end. Please note that an appropriation does not arise when a charity makes a gift to a qualified donee before the issuance of a Notice of Intention to Revoke a Charity or when a charity transfers property to a beneficiary while delivering a charitable campaign, see RC 4424, Completing the Tax Return Where Registration of a Charity Is Revoked.

An assessment under subsection 188(2) is limited to appropriations made within 120 days of the deemed year-end. Thus, if a charity transferred property earlier than 120 days before the deemed year-end, subsection 188(2) would not apply. On the other hand, an assessment pursuant to subsection 160(1) could apply, provided that the fact situation accords with the following provisions.

It would appear that there may be some misconception as to the extent of the liability under subsection 160(1) and whether it applies beyond Part I liabilities. In this respect, please note that a person, who receives property from a transferor, in this case the charity, may be jointly and severally liable for the charity's liability pursuant to paragraph 160(1)(e) of the Act. For this provision to apply, the charity must be liable to pay an amount under the Act in respect of the year of the transfer or any preceding year. In addition, the property must have been transferred for less than fair market value to a person with whom the charity was not dealing at arm's length.

Should you have any questions or require additional information, please do not hesitate to contact Lindsay Frank at the number provided above.

B.J. Skulski
Manager
Insolvency and Administrative Law Section
International and Trusts Division
Income Tax Rulings Directorate

c.c. Shawn Leduc
International section
Accounts Receivable Tax Programs Division