Bankruptcy and Insolvency Act

Section 121

Subsection 121(1)


Leo Beauchesne Inc. v. The Queen, 77 DTC 5308, [1977] CTC 398 (FCTD)

A discharge order based on a proposal made under Part III of the Bankruptcy Act discharged the taxpayer's liability relating to deductions which it had erroneously taken in prior years in respect of which no reassessment action yet had been taken by the Minister.

Section 172.1

Subsection 172.1(8)


Schnier v. Canada (Attorney General), 128 O.R. (3d) 537, 2016 ONCA 5

assessment under appeal is not an “amount payable” and can be classifed as unprovable

At the time of his bankruptcy, the taxpayer had unpaid income tax assessments of $4.478 million of which$4.424 million were under appeal to the Tax Court of Canada. At issue was whether the full assessed amount qualified as an “amount payable, within the meaning of subsection 223(1) of the Income Tax Act … by an individual,” in which case s. 172.1 of the Bankruptcy and Insolvency Act would have been applicable.

In finding that the taxes under appeal did not so qualify under s. 223(1), Brown JA noted the Attorney General’s arguments that ITA s. 158 deems an assessed amount to thereupon be “payable forthwith,” and s. 152(8) deems an assessment to be “valid and binding,” and stated (at paras. 41, 49-50)

Both ss. 152(8) and 248(2) indicate that until the objection or appeal process is concluded, the amount of tax the Minister can compel a taxpayer to pay cannot be known. The assessed amount can change from time to time by virtue of judicial decisions or new assessments... .

...The restraints placed by ITA s. 225.1 on the enforceability of an assessed amount of tax that is under appeal are strong indicators that a claim based on those amounts would not be provable in a bankruptcy.

Consequently, where amounts of income tax assessed against an individual bankrupt taxpayer remain under appeal at the time of his discharge hearing, the existence of the outstanding appeal entitles the trustee to classify the claim based on the unpaid assessed amounts as a contingent, unprovable one.

He then noted (at para. 63) that

to qualify as “personal income tax debt” within the meaning of s. 172.2(1), the tax debt must be a proven claim.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 223 - Subsection 223(1) appealed assessment not an amount payable 130
Tax Topics - Income Tax Act - Section 152 - Subsection 152(8) assessed amount under appeal not an amount payable 269

Section 173

Subsection 173(1)

Paragraph 173(1)(a)


In re Katari, 89 DTC 5324 (S.C.O.)

The taxpayer, who made an assignment in bankruptcy primarily as a result of his failure to make quarterly remittances of income tax instalments, failed to establish the onus set out in s. 173(1)(a), and pursuant to s. 172(2) of the Bankruptcy Act, his discharge was made conditional on repaying the amount owing in 80 monthly instalments without interest. Granger J. noted that as a result of the taxpayer's failure to make instalments, he had been able to enjoy a higher standard of living than he would have enjoyed if he had complied with his statutory duty like most Canadians.