Section 325

Administrative Policy

5 October 2012 APFF Roundtable, 2012-0454241C6 F - Double imposition

double taxation from contemporaneous ITA/ETA assessments avoided by ITA assessment being 1st

A, who is indebted to each of CRA and Revenue Quebec (ARQ) for $50,000, transfers $10,000 of property to A's spouse (B) for no consideration. An assessment under ETA s. 325 generally is to be reduced by the amount of the corresponding assessment under ITA s. 160, whereas there is no comparable reduction provision in s. 160 - so that double taxation can be avoided if the ETA assessment is issued second. CRA stated (TaxInterpretations translation):

In the situation where the two assessments are being dealt with at the same time, the administrative policy of the CRA is to issue the assessment under ETA section 325 last.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 160 - Subsection 160(2) ETA s. 325 assessment in same audit is issued after ITA s. 160 to avoid double tax/no priority accorded to ARQ 185

Subsection 325(1)

See Also

White v. The Queen, 2020 TCC 22

transfer by tax debtor to joint bank account with his spouse was not a transfer to her

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.

Words and Phrases
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 137

Nelson v. The Queen, 2017 TCC 178 (Informal Procedure)

the agreement between two co-borrowers as to their respective responsibility for joint loans governed for tax purposes

The taxpayer and her husband were jointly liable under a bank line of credit and credit card. Four transfers of money totaling $143,000 were made to the husband’s company (the "Company”) during 2008, 2009 and 2011 from the couple’s joint bank account and MasterCard (the “Transfers”). The taxpayer considered half of the funds so transferred as hers and as a loan, and the taxpayer and her husband had an oral agreement respecting monthly repayments that would be made upon the Company becoming profitable. In July 2013, the husband transferred his ½ co-ownership interest (the “Interest”), in a real estate property that they co-owned, to her for no stated consideration. In September 2013, the Company ceased operations, and in 2015, the husband was assessed under ETA s. 323(1) for failure to make GST remittances – and the taxpayer was assessed under s. 325(1) respecting the transfer of the Interest to her.

In the course of finding (at para. 42) that half of the Transfers constituted loans made by the taxpayer to her husband and the Company and (at para. 58) that the transfer of the Interest to her was in repayment of part of such loans, Lafleur J stated (at paras 52):

… [W]hile … toward the banks, each of Mr. and Mrs. Nelson was fully responsible for the debts under the Line of Credit and the Credit Card, that has no bearing on the obligations between Mr. and Mrs. Nelson, as “a co-debtor, while liable to the creditor for the full amount, is only liable as among the co-debtors for his or her share” (Lafrentz v M & L Leasing, 2000 ABQB 714 … at para 32 … . [T]he evidence showed that the agreement between Mr. and Mrs. Nelson was that, between themselves, half of the money borrowed under the Line of Credit and withdrawn from the Credit Card was the responsibility of Mrs. Nelson and the other half, of Mr. Nelson.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 160 - Subsection 160(1) agreement between husband and wife established that joint bank debt was borne on 50-50 basis 117