Section 160

The taxpayer was the sole designated beneficiary of two RRSPs held by her husband at his death in 2007.  When his estate failed to pay an assessment respecting his 2006 year, the Minister assessed the taxpayer for the same amount under s. 160(1).  In finding that this transfer after her husband’s death constituted a transfer to the deceased’s spouse (so that the s. 160(1) assessment was valid), Graham J noted that

• although dictionary definitions and the legal meaning of spouse “clearly contemplate a relationship between two living people” (para. 22), “people routinely use the word ‘spouse’ to refer to the surviving member of a coupled” (at para. 23),
• some (but not all) provisions referred to “spouse” to mean a widow or widower (ss. 146(8.91) and 70(6)) or to be inclusive of widows and widowers (ss. 72(2) and 148(8.2)), and
• the alternative interpretation “would absurdly provide relief only to those individuals whose spouses had failed to comply with the tax system during their lifetimes” - and given that “transfers of property to widows and widowers under a will are clearly caught by subsection 160(1)” (para. 74), such a system would “irrationally…only provide relief if a tax debtor had a RRSP” (para. 72). 

He noted that using the colloquial meaning of "spouse" was not necessarily transferable to other provisions with a different context and purpose (para. 79).

The taxpayer was issued shares from her husband's private corporation ("Northside"), in an amount that gave her approximately 98% of the stake in the corporation. Rip CJ found that this was a transfer "in any manner whatever" to the taxpayer from her husband, for the purposes of s. 160(1). After citing Kieboom, he stated (at para. 38):

[Mr. Strachan] ... divested himself of the rights attached to his shares in the same [98%] proportion (i.e. his right to vote as sole shareholder, to receive 100 percent of the dividends should they be declared and to receive all the remaining property of the corporation on dissolution). The fact that Mr. Strachan accomplished the transfer of shares to the appellant by causing Northside to issue them should make no difference.

The Minister assessed the appellant for director's liability in respect of a corporation that had not remitted net tax for reporting periods ending on and after July 1, 2000. The appellant had been excluded by the franchisor of the corporation's business from any input into the financial affairs of the corporation after October 2001, and from any involvement at all after July 2002. The applicant had no access to the corporation's records, and CRA would not provide any background as to how it had computed the corporation's liability. Paris J found that this was sufficient to shift onto the Minister the burden of proving the correctness of the corporation's assessment, and that this burden had not been discharged.

The taxpayer was the designated beneficiary of her husband's RRSP, and received the RRSP proceeds upon his death, and was assessed for his unpaid taxes under s. 160. Lamarre J found that the taxpayer and her husband were not related persons under s. 251(1)(a) at the time of transfer because their marriage was dissolved on the husband's death, so that at the time of transfer they were not related by marriage under s. 251(2)(a). The taxpayer and her husband also were not related under s. 251(1)(b), because the RRSP devolved to the taxpayer directly by operation of Ontario's Succession Law Reform Act, rather than forming part of the husband's estate.

In response to a submission of the Crown that the taxpayer was factually not at arm's length with her deceased husband because the relevant time was that at which she was designated as his RRSP's beneficiary, Lamarre J stated (at para. 29) that there was nothing in the wording of s. 160(1):

that relates the relationship between the transferor and the transferee to any moment other than that of the transfer of the property (or a moment after the transfer in a case where the transferee has since become the transferor's spouse. The subsection refers throughout to the act of transferring and the time of the transfer, without specifying that other moments in time, previous to the transfer, could be contemplated for the purpose of its application to the transferee.

As the transfer to the taxpayer at arm's length, s. 160(1) did not apply.

Boyle J found that the taxpayer's husband had a substantial accrued debt to the taxpayer relating to unpaid overtime from his medical practice business, and unpaid rent for his use of her property in the practice. This debt exceeded the amounts transferred to her from her husband, and thus offset any possible liability she would otherwise have had under s. 160 in respect of her husband's tax debt.

The taxpayer's son had a tax debt when he deposited his pay cheques to her bank account, which he later withdrew in full. Bocock J found that the deposits were a transfer for the purposes of s. 160(1), and that the undertaking and understanding that the taxpayer would not access the deposited funds did not represent valuable consideration: "her mere moral obligation not to access the funds does not create a recognizable legal prohibition from doing so" (para. 13). Consequently, she was liable under s. 160 for the amount of the funds deposited to her account.

The taxpayer held the matrimonial home. Her husband accumulated a tax debt for several years while he deposited amounts into the taxpayer's bank account which she used to pay the mortgage. V.A. Miller J. dismissed the taxpayer's contention that no transfer of funds had taken place. She could not be a "mere conduit" for her husband's mortgage payments because she was the only mortgagor named on the mortgage, and he was only a guarantor whose guarantee had not been called by the bank. Moreover, a deposit of funds into an account constitutes a transfer (Livingston).

Angers J. found the taxpayer liable for the value of the family residence transferred from her husband, whose tax debt was approximately $900,000. The taxpayer contended that she paid valuable consideration pursuant to a "deed of partition," dated 20 April 1989, to change the distribution of their property between them under the "change of matrimonial regime" provisions under the Civil Code. However, the house was transferred under a separate deed of sale dated 30 June 1988, under which the taxpayer was to pay $1 and "other good and valuable consideration."

In rejecting the taxpayer's contention, Angers J. found that:

• the deed of sale was not part of any matrimonial regime, given inter alia that it contained a provision that specifically denied that there was a matrimonial regime;
• the consideration was not fixed at the time of transfer; and
• no consideration was in fact paid, and no change in matrimonial regime took place.

The taxpayer received $765,350 in real properties from his father, who had a tax debt of $4,225,985. Bocock J. found that the taxpayer's claim that he had paid consideration in the form of loans to his father and related persons was dubious. Among the reasons listed were that the taxpayer did not have the capacity to lend in the purported amount, and the lack of any evidence of the loans beyond the taxpayer's own testimony.

The taxpayer's tax-indebted father gave her $120,000. Angers J. accepted her position that $110,000 of that amount was meant to benefit the taxpayer's sister and her father's business corporation, so her liability under s. 160(1) was limited to $10,000.

The taxpayer held an account in the name of her father's business. The father owed approximately $500,000 in taxes. He bought some germanium-rich waste for $31,762.50, and sold it for two payments of $43,200 and $24.817.74. He had the customer make the first payment into the taxpayer's account, and three days later she paid $31,762.50 to the supplier.

The taxpayer claimed that she had an enforceable verbal agreement to make the $31,762.50 payment, and therefore her $43,200 liability under s. 160(1) should be reduced by $31,762.50 of consideration. Hogan J. found this claim to be credible. The payments into and out of the account concerned the purchase and sale of the same germanium waste, and the two payments were made within three days of each other. It was a "reasonable inference" to find an enforceable verbal agreement, rather than the mere "moral obligation" contended by the Minister.

The taxpayer was unsuccessful in arguing that the limitations period could shield her from liability under s. 160(1), in respect of a dividend received from her wholly owned tax-indebted corporation. Section 160 does not have a limitations period.

The taxpayer's father transferred real property to her in June 2006 without her knowledge. She discovered the transfer in December 2008 and transferred the property back on 26 February 2009 after obtaining legal advice. Angers J. found that the taxpayer was not liable under s. 160 for her father's unpaid taxes. The common law on property provides that an unwitting recipient of a gift can, as the taxpayer had done, repudiate the gift retroactively (para. 16). There had therefore been no transfer of property, and hence no liability under s. 160. Angers J. also noted that the Court of Appeal's obiter dictum in Biderman, that a failed testamentary gift could not give rise to s. 160 liability, extended to inter vivos gifts (para. 19).

The taxpayer's brother, who was insolvent and facing a large tax debt, deposited $15,000 into a bank account of the taxpayer. The brother periodically withdrew from the account to pay for living expenses. Tardif J. found that, while the sister was apparently not aware that she was participating in a scheme to conceal assets from collection (she did not inquire), she was nevertheless liable under s. 160(1).

The taxpayer argued that she held the funds in the capacity of mandatary (the Quebec equivalent of agent). While Tardif J. found that no such relationship was present, he stated at para. 40 that a transfer of property from mandor to mandatary is not a transfer for the purposes of s. 160, as such a transfer does not divest the mandator of ownership of the property transferred.

The taxpayers lived together with their father in a condominium which he had purchased but title to which he conveyed to them. Bonner J. found that the contributions of the taxpayers to the shared costs of running the household were unrelated to the transfer to them of the condominium and, therefore, did not represent consideration for the transfer.

The taxpayers were the wife and children of a man who died intestate and insolvent, with a tax debt of approximately $270,000. The taxpayers deposited the proceeds from two life insurance policies (which were payable to designated beneficiaries rather than to the estate) into an account in the estate's name. Angers J. found at para. 41 that this labeling of the account was a mistake and that the money deposited to the account was not part of the estate. Consequently, withdrawals made from that account were not a "property transfer" under s. 160.

The taxpayer's common-law partner, who owed tax, transferred to the taxpayer his 50% interest in the house they shared, but reserved a right to use the house. By operation of s. 160, the taxpayer became jointly liable for tax the partner owed at the time of transfer. In determining the amount under s. 160(1)(e), Archambault J. found that "the amount the transferor is liable to pay in respect of the taxation year in which the property was transferred" under s. 160(1)(e)(ii) did not exclude the interest that accrued to the transferor after the taxation year in question, stating at para. 19 that "Parliament clearly intended, by adding the words 'or in respect of', not to impose any such limit."

Archambault J. pointed out at paras. 27-28 that the taxpayer's liability was not a distinct tax debt, so no interest accrued on her liability beyond the interest accruing to the transferor.

Sums which the taxpayer's husband transferred to their joint bank account in order to make payments on a mortgage was secured on the family home, which is owned by the taxpayer, and to make payments on vehicle leases registered to the taxpayer, constituted transfers of property to her for purposes of s. 160(1).

Submissions made that full consideration was given in the form of the taxpayer's legal entitlement to be supported by her husband, and the use by her husband of a room in the home as an office, were inconsistent with the Yates decision. Furthermore, although the taxpayer performed household chores, these "were more in the nature of a donation rather than as consideration for the property transferred" [para. 26].

Facing insolvency, the taxpayer's husband made a proposal in 2003, under the Bankruptcy and Insolvency Act, providing for monthly payments to his creditors. The creditors, including the CRA, agreed. The husband transferred a house to the taxpayer, and subsequently defaulted on the BIA agreement. The creditors, including the CRA, agreed to a second proposal which effectively picked up where the first proposal left off.

Boyle J. found that, while the second proposal was intended as a continuation of the first, it was nevertheless a distinct proposal. Accordingly, when the taxpayer's husband defaulted on the first agreement, he was again liable to the CRA for taxes owing. By operation of s. 160(1), the taxpayer became jointly and severally liable with her husband for all the taxes owing, and her liability was not later canceled by the second BIA agreement with the CRA.

In response to a submission of the taxpayer (para. 8) "that subsection 160(1) ... does not include interest" McArthur, J. stated that "with respect to interest, it is true that this section does not apply to interest, but the deeming provisions in the Regulations to the Act clearly state that interest is included in section 160 for transfers".

The taxpayer acquired the family home in consideration for payment by way of set-off against the amount of a loan that she had made to her husband and her assumption of the mortgage on the property. However, in fact, the mortgage payments continued to be made by her husband. In finding that there had been adequate consideration for s. 160(1) purposes, it was noted that the taxpayer had provided her husband with equivalent consideration by covering other family expenses.

The taxpayer, who owned one-third of the shares of a corporation that paid a dividend to its shareholders, and was a director and bookkeeper of the corporation, was found not be acting in concert with the other two directors (who were the remaining shareholders) when the directors with her assent declared and paid a dividend given that the other two directors largely ignored her when they were not in conflict with her. Accordingly, there was no common mind amongst the three directors. S.160(1) did not apply to the payment of the dividend to the taxpayer.

A company ("Snazz") paid a dividend to a company ("151041") with which it did not deal at arm's length. 151041, which did not deal at arm's length with the taxpayer, sold a house to the taxpayer for a sale price lower than the home's fair market value. In finding that a portion of the tax liability of Snazz could be assessed against the taxpayer under s. 160, Lamarre Proulx T.C.J. found (at p. 562) that "the transferee may himself become a transferor subject to subsection 160(1) of the Act if, at the time of the second transfer, he himself is a tax debtor liable either on his own account or jointly and severally with the first transferor"; and that the tax liabilities that may be transferred under s. 160 include those that have not yet been reflected in an assessment given that "it is a recognized principle in tax law that it is not the assessment that creates a tax liability, but the application of the Act".

Following an assessment of the taxpayer under s. 160 she alleged that there had been a transfer of a one-half interest in a property to her from her husband in the summer of 1991 when there was a discussion between them that she should receive the equity in the property rather than, as alleged by the Crown, three years later when, on a sale of the property, the husband signed a direction authorizing the purchaser to pay the closing proceeds to her. McArthur T.C.J. stated (at p. 1244):

"It takes more than an intention or uncertain conversation to transfer an interest in real estate. The law of contract requires a clear statement of transfer, acceptance and delivery."

The fact that a transfer of property from the taxpayer's spouse to the taxpayer was void against the trustee in bankruptcy of the spouse did not prevent the application of s. 160(1) to the taxpayer given that the proper interpretation of the Bankruptcy Act was that the trustee had to do something to render the transaction void, which did not occur.

The taxpayer's husband contributed $5,500 to her RRSP on March 1, 1986. Her husband's income tax liability for his 1986 taxation year and preceding years would prove to be in excess of $43,000.

In finding that an absolute discharge received by the taxpayer's husband on January 25, 1989, releasing the husband from all claims provable on bankruptcy, eliminated any liability of the taxpayer under s. 160(1), Bell TCJ. noted that the taxpayer's husband was liable for taxes in respect of his 1986 year at the time of the March 1, 1986 transfer even though he had not yet been assessed, and also noted that s. 160 now spoke in the present tense (the transferor "is liable to pay"), with the result that subsequent elimination of the husband's liability eliminated the taxpayer's liability.

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".

The taxpayer was not liable under s. 160(1) in respect of a cash transfer of $9,100 made to her by her husband because a prima facie case has been established that non-capital losses of her husband that Revenue Canada had neglected to carry back to the taxation year in question would have eliminated the tax liability to which the s. 160 reassessment related, and because it was established that the payment represented a repayment of funds arising from the sale of the taxpayer's interest in the matrimonial home which had been invested by her husband in certain mutual funds before they were sold.

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.

At the beginning of its 1985 and 1986 calendar taxation years, a corporation declared a dividend to its two shareholders (husband and wife). Such dividends were paid by monthly "draws". McArthur TCJ. found that at the time of declaration of the dividends, the shareholders (who received only a nominal salary from the corporation) had committed their future services to the benefit of the corporation's business and that in fact the dividends were not paid until the services were rendered. Accordingly, the dividends were paid for valuable consideration, with the result that s. 160(1) did not apply.

It was found that the taxpayer had a 50% interest in property transferred to her by her husband on the basis of there being either a resulting trust or constructive trust in relation to such property. Accordingly, s. 160(1) applied only to the beneficial interest in the property that was transferred to her by her husband.

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 taxpayer acquired the personal residence of a related individual in consideration for issuing non-voting preference shares which were redeemable by the taxpayer but not retractable by the individual. In finding that the shares had no fair market value for purposes of s. 160, Dussault J. stated (p. 1541):

"The restrictions encumbering the preferred shares and the absence of control thus prevented anyone, including anyone who were to seize all of the shares held by Mr. Pierre Savoie [the individual], from recovering any value whatever in respect of the property transferred to [the taxpayer], since the redeeming of class G shares received in consideration could not have been obtained by a holder who did not have legal control, whether direct or indirect."

In finding that the appellant could be assessed under s. 160 respecting the alleged "transfer" to her by her husband of a 1/2 interest in the matrimonial home notwithstanding a subsequent judgment that the conveyance was void pursuant to the Fraudulent Conveyances Act (Newfoundland), Rip J. applied authority "that a conveyance that is fraudulent and void as against creditors is not absolutely void but voidable and is good as between the parties to it" (p. 1172).

After comparing the wording of ss.160(2) and 152(1), McArthur TCJ. stated (p. 1935):

"... I am satisfied that the words 'at any time' provide a freedom to assess without the restrictions of '... with all due dispatch' regardless of the lapse of time since the assessment at issue is an original assessment."

The taxpayer's common-law partner, who owed tax, transferred to the taxpayer his 50% interest in the house they shared, but reserved a right to use the house. Archambault J. found (at para. 31) that the reservation meant that taxpayer had not received an undivided interest in a property. Therefore, s. 160(3.1) was not applicable for calculating the fair market value of the transferred interest.