Words and Phrases - "transfer"
Barwicz v. The King, 2024 TCC 93
The taxpayer was one of nine beneficiaries of a discretionary inter vivos personal trust which ceased to be resident in Canada in 2001. In January 2004, the trust distributed $2.25 million to the taxpayer, and in December 2005, made a further distribution to him of $0.83 million, as a result of which the trust was terminated.
After finding that the trust had realized departure tax pursuant to s. 128.1(4)(b) in 2001 and had a tax debt that had amounted to $1.6 million at the end of 2005, Gagnon J confirmed the Crown’s position that the taxpayer had not given consideration to the trust for either distribution (e.g., in exchange for part satisfaction of his capital interest in the trust). In this regard, Gagnon J first noted (at para. 62, TaxInterpretations translation):
[I]f one party is enriched and the other impoverished by the same amount, it will be possible to conclude that the party who became richer did not offer equivalent consideration … .
In finding that that was the situation here, he indicated that:
- “the trustee's distributions had no impact on the rights of a beneficiary of the Trust who had or had not received a distribution” (para. 65); and
- although the taxpayer “had a right under the Trust to be considered by the trustee for any distribution on the same basis as the other beneficiaries … there is no reason to believe that anyone would have paid even a very small amount for [this right]” (para. 67);
In also rejecting the taxpayer’s submission that the deeming by s. 107(2) of proceeds for the distributed property equal to its cost amount constituted the receipt of consideration for s. 160(1)(e) purposes, Gagnon J stated (at para. 79) that “[w]hen there is a transfer of value between two patrimonies, there is a transfer within the meaning of subsection 160(1)” and it was “hardly conceivable that the tax treatment of a transaction could interact with the notion of transfer contemplated by Parliament for the purposes of subsection 160(1)” (para. 80). In any event, the deemed proceeds arising under s. 107(2) were not deemed to be paid by the beneficiary, and the taxpayer’s argument implied that in the quintessential case of a parent gifting property to a child, s. 160 would not apply because the parent received deemed FMV proceeds under s. 69(1)(b).
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 128.1 - Subsection 128.1(4) - Paragraph 128.1(4)(b) | s. 128.1(4)(a) applied for s. 94 purposes | 286 |
| Tax Topics - Income Tax Act - Section 94 - Subsection 94(3) - Paragraph 94(3)(a) | s. 94(1)(c) did not change the shortened taxation year arising under s. 128.1(4)(a) | 229 |
| Tax Topics - General Concepts - Fair Market Value - Other | capital interest in discretionary personal trust had nil value | 157 |
30 October 2002 Internal T.I. 2002-0134077 F - ATTRIBUTION DES GAINS EN CAPITAL
Two individuals transferred the shares they held of a particular company to their respective holding companies which, in turn, each disposed of a portion of those shares to the individuals’ respective spouses in consideration for non-interest-bearing notes. Following an exchange of such shares for shares of another class, and an amalgamation of the company, the spouses disposed of the shares of Amalco at a gain. In finding that s. 74.2(1) applied, the Directorate stated:
[W]e consider it possible that an indirect transfer of the individuals' shares to their spouse was effected through their respective holding companies … [so] that the shares disposed of by the spouses … constitute substituted property for the property transferred indirectly by the individuals,
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 74.5 - Subsection 74.5(6) | presence of indirect transfer through Holdcos for s. 74.5(1) purposes reinforced by s. 74.5(6) | 103 |
White v. The Queen, 2020 TCC 22
The taxpayer’s husband (Mr. White), who had previously been assessed as director of a defunct company for unremitted net GST and source deductions, deposited over a one-year period, $89,806.72 to a joint bank account of him and the taxpayer. During that period, amounts were transferred from the joint bank account to the taxpayer’s own bank account, which the taxpayer used to pay family expenses. The remaining amounts in the joint account were then garnished by a third party to pay off a debt of Mr. White. The taxpayer was assessed under ITA s. 160 and ETA s. 325 on the basis that her husband’s pay deposits to their joint account constituted “transfers” of “property, directly or indirectly” to her for purposes of those provisions.
In finding that the such deposits were not such transfers, D’Arcy J stated (at paras 28-30:
In my view, applying Fasken Estate, the mere placing of funds in a joint bank account does not constitute a transfer. Mr. White did not divest himself of the funds when he deposited them into the Joint Bank Account. He continued to have full access to the funds in the account. …
… Mr. White did not defeat or in any way hinder the Minister’s efforts to collect any tax he owed by placing his remuneration in the Joint Bank Account. The Minister could have taken collection action with respect to funds in the Joint Bank Account. …
Once the funds were placed in the Joint Bank Account, the Appellant had the ability to effect a transfer; however, such transfer did not occur until the Appellant removed the funds from the account.
D’Arcy J went on to find that $34,052 had been transferred from the joint account into the taxpayer’s own bank account during the relevant period, so that the assessment under s. 325 was confirmed to that extent, with the s. 160 assessment being vacated.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 160 - Subsection 160(1) | deposit by spouse to joint bank account with the taxpayer was not a transfer to her | 145 |
2 November 2015 External T.I. 2014-0558991E5 F - Loan from an Amateur Athlete Trust
Must an athlete, who was deemed to be a beneficiary of an amateur athlete trust which granted loans for the purchase of a home, include the loan amount in his income? CRA responded:
In general, a bona fide loan does not constitute payment or transfer. However, it is a matter of both fact and law as to whether, in a particular case, a bona fide loan was made by one individual to another. In this regard, for example, the Canada Revenue Agency would be of the view that if, at the time the loan is made by the trust, the athlete is unable to repay the loan and/or to provide reasonable security, the trust will be divested of property (funds) that could at that time be a payment or transfer of an amount within the meaning of paragraph 143.1(1.2)(d).
Kvas v. The Queen, 2016 TCC 199
The general contracting company (“CIA”) of two brothers was dissolved in January of 2008 (the “Dissolution Date”) for failure to file Ontario corporate tax returns. Although “upon such dissolution, the property of CIA technically and legally escheated to the provincial Crown” (para. 40), in fact, a CIA bank account was thereafter used to pay various CIA creditors. The Minister assessed the brothers under s. 160 on the basis of alleged property transfers to them after the Dissolution Date.
Bocock J found that there were no actions of CIA that constituted a transfer under s. 160, stating (at paras 28, 33, 40):
[S]ection 160 requires a transfer by a transferor. … [T]here is no case law that suggests a transferor includes a person who ceases to exist and has not otherwise undertaken some act or omission which transfers property prior to its… demise or dissolution. …
After its dissolution, CIA could not legally, and … did not factually direct, author or contemplate such a transfer… .
…There is no jurisprudence which suggests that the act or intention of a transferor (as opposed to that of a transferee) is unnecessary in order to engage section 160.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 84 - Subsection 84(2) | involuntary dissolution was not a s. 84(2) winding-up | 168 |
7 March 2016 External T.I. 2015-0608211E5 - Assignment of right to purchase
Would an assignment to a trust by a non-resident person of a right to purchase a Canadian apartment unit be considered a disposition of taxable Canadian property? CRA responded:
According to Black's Law Dictionary 9th Ed, “option” includes the right to buy an asset at a fixed price within a specified time. Based on this definition, the right to purchase an apartment should be considered an option for purposes of the Act.
…“[A]ssignment” is a form of “transfer”, and therefore, provided all other conditions of the definition are met, the assignment of the right to purchase the apartment to a trust would be considered a disposition.
The Queen v. Kieboom, 92 DTC 6382, [1992] 2 CTC 59 (FCA)
In finding that s. 74(1) applied to attribute dividend income to the taxpayer when he permitted his wife to subscribe for common shares of his private company for nominal consideration, Linden J.A. stated (p. 6386):
"In my view, the phrase 'transfer of property' is used in this provision in a rather broad sense ... The transfer, which in this case was indirect, in that the taxpayer arranged for his company to issue shares to his wife, is nevertheless a transfer from the husband to the wife. There is no need for shares to be transferred in order to trigger this provision ..."
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 246 - Subsection 246(1) | 60 | |
| Tax Topics - Statutory Interpretation - Interpretation Bulletins, etc. | 73 |
Delisle v. The Queen, 95 DTC 650 (TCC)
Funds that the taxpayer's son had transferred into a dormant bank account of the taxpayer were held by her as agent for her son, with the result that there had not been a "transfer" for purposes of s. 160(1), i.e., "to convey or make over (title, right or property) by deed or legal process".
Montreuil v. The Queen, 95 DTC 138 (TCC)
The appellant received a bequest under the will of his father, who died in the Cayman Islands while owing tax and interest to Revenue Canada. In finding that s. 160(1) applied to the appellant, Dussault TCJ. rejected submissions that s. 160 required an intention to evade tax obligations on the part of the transferor and that s. 160 did not apply to transfers by operation of law and not as a result of a positive act of a taxpayer. Dussault TCJ. stated (p. 138) that "transferring does not necessarily imply a positive act by the transferor and neither does it require that a specific action be performed when alive."
Although the transfer occurred when the appellant's father died rather than when the bequest was paid, the appellant was liable for interest that accrued after the date of death (until the total reached the sum bequested by him): interest that compounds until full payment of an amount owing for a specified taxation year that has transpired prior to the transfer constitutes an amount that the transferor (in this case, the deceased) is required to pay under the Act "in respect of" that preceding taxation year.
Lemire v. The Queen, 2013 DTC 1065 [at at 346], 2012 TCC 367, aff'd 2014 DTC 5088 [at 7100], 2013 FCA 242
The taxpayer's common-law partner, in order to circumvent a hold on his account relating to personal financial difficulties, would have the taxpayer deposit the cheques in her account, and then usually transfer the funds to him on the same day. Tardif J. found that these transactions did not effect a "transfer of property" to the taxpayer for the purposes of s. 160(1). Although the Court of Appeal in Livingston held that the mere deposit of funds into another person's bank account constitutes a transfer of property, Tardif J stated (at TCC para. 35):
The fact that an item of property is simply in the possession or control of a third party does not have the effect of removing it from the tax debtor's patrimony. Although the scope of the word "transfer" is broad, a transfer still requires the transferor to meet a condition precedent, namely, to have actually vested the property in the alleged transferee or recipient.
The taxpayer followed her partner's instructions precisely, she rarely held the funds for more than a few hours, and she never had any right to enjoy or dispose of the proceeds (para. 71). Tardif J therefore found that, even if there were a transfer, the taxpayer's behaviour was consistent with a mandatary relationship under civil law, and transfers of property to a mandatary are not transfers of property under s. 160(1).
Noël JA affirmed that Tardif J's decision was correct under civil law, noting in particular that Livingston dealt with common law (FCA para. 30).
Algoa Trust v. The Queen, 93 DTC 405, [1993] 1 CTC 2294 (TCC)
After finding that s. 160(1) applied to a cash dividend paid by a private corporation to its shareholder, Rip J. went on to find that s. 160(1) did not apply to a stock dividend given that the issue of shares is not a "transfer" because the corporation has not divested itself of its property, and given that there is no transfer of property when a dividend is declared by the directors, as the funds represented by the dividend are under the control of the corporation until the corporation pays the dividend.
The Queen v. Paxton, 97 DTC 5012 (FCA)
After the taxpayer entered into an agreement for the sale of shares then owned by him to an arm's-length purchaser ("Tandet"), he took advantage of a provision in the agreement that permitted him, prior to the closing date, to elect to transfer his shares to family members on the condition that the family members complete the sale. In finding that there was no "transfer" to the children for purposes of s. 73(5) of the Act, Robertson J.A. stated (at p. 5016) that "the type of transfer embraced by subsection 73(5) ... is, at a minimum, one which enables the purchaser to exercise the degree of control necessary to determine the ultimate fate of the family business," whereas here, the agreement deprived the children of this right and "they had no right to the use or enjoyment of the shares other than to transfer them within one day to Tandet and to retain a small portion of the sale proceeds."