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Posts tagged "Subsection 160(1) ITA - Transferee Liability"

Gentile Holdings Ltd. v. R. – TCC: Dividends paid to taxpayer subject to a valid non-arm’s length assessment under subsection 160(1) of the ITA
Apr 14, 2020 By Bill Innes
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Précis: The taxpayer received a dividend in the amount of $600,000 in 2006 from its subsidiary corporation, 0699406 B.C. Ltd. (“0699”). The Minister assessed the taxpayer under subsection 160(1) in respect of the non-arm’s length transfer. The taxpayer resisted the assessment both on the basis that the relationship with 0699 was at arm’s length and that it gave consideration for the dividend in the form of a loan back to 0699. The Tax Court rejected both arguments and dismissed the appeal with costs.
Gentile Holdings Ltd. v. R. – TCC: Dividends paid to taxpayer subject to a valid non-arm’s length assessment under subsection 160(1) of the ITAREAD MORE »
Aitchison Professional Corporation v. R. – TCC: Provision of legal services free to a related professional corporation not a transfer of “property” for the purposes of section 160
Jul 20, 2018 By Bill Innes
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Précis: James Aitchison is a lawyer who owed at the time of trial in excess of $2,000,000 in federal income tax plus interest. He has not paid any federal income tax since 1992. In December of 2003 he and his two daughters, both lawyers, incorporated Aitchison Professional Corporation (APC). It appears that since that date all fees for his legal advice have been billed by APC which has provided him little or no compensation for his work. [2] In 2012, the Minister of National Revenue assessed APC for almost $2.1 million pursuant to section 160 of the Income Tax Act. The assessment was premised on the assumption that James had transferred property worth more than $3 million to APC for little or no consideration between January 1, 2007 and September 30, 2010. The Respondent alleges that the property transferred was what the Respondent describes as James’ “right to invoice for legal services”. In short Justice Graham found that Mr. Aitchison had transferred “services” to APC, not property and that accordingly section 160 of the Act did not apply. Thus the appeal of APC was allowed, with costs.
Aitchison Professional Corporation v. R. – TCC: Provision of legal services free to a related professional corporation not a transfer of “property” for the purposes of section 160READ MORE »
Mottle v. R. – TCC: Transfer of spouse’s employment income to taxpayer’s account for use to defray household expenses nevertheless subject to subsection 160(1)
Jul 06, 2018 By Bill Innes
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Précis: Ms. Mottle’s spouse caused his employment income to be transferred to Ms. Mottle’s account from which she used it to pay household expenses. There were 20 transfers from September 6, 2013 to July 18, 2014 totalling $10,849.92. At the date of each transfer the spouse’s outstanding tax debt exceeded the amount of the transfer, The debt totalled some $36,255.55. Ms. Mottle was assessed pursuant to subsection 160(1) of the Income Tax Act (the Act) in respect of the transfers. The Tax Court held that it was bound by the decision of the Federal Court of Appeal in Yates v. Her Majesty, 2009 FCA 50. The use of the transferred funds for family or living expenses did not preclude the operation of subsection 160(1) to tax the recipient of the funds. The appeal was dismissed without costs (it was an informal procedure appeal).
Mottle v. R. – TCC: Transfer of spouse’s employment income to taxpayer’s account for use to defray household expenses nevertheless subject to subsection 160(1)READ MORE »
HLB Smith Holdings v. R. – TCC: Operating company under control of two unrelated directors acting in concert – subsection 160(1) assessments upheld
May 31, 2018 By Bill Innes
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Précis: The subsection 160(1) reassessments under appeal all resulted from dividends paid by an operating company in which the Smith Family had a 50% interest: [1] Each of the four appellants has appealed an assessment under section 160 of the Income Tax Act. The assessments of HLB Smith Holdings Limited (the “Holding Company”) and the Smith Family Trust (2001) relate to the payment of dividends in 2007 and 2008 by Power Electric Systems Limited (the “Operating Company”) to the Holding Company and, in the case of the Smith Family Trust (2001), the subsequent payment of dividends by the Holding Company to that trust. The assessments of Wayne Smith and Brenda Lee Brunelle relate to subsequent distributions by the Smith Family Trust (2001) to each of Mr. Smith and Ms. Brunelle. The other 50% was owned by the Scott Family. The taxpayer argued that they were not dealing at less than arm’s length with the Operating Company since Mr. Smith was a passive director who accepted the decisions of Mr. Scott in terms of dividends and other corporate matters. The Tax Court rejected this argument holding that Mr. Smith and Mr. Scott acted in concert to control the Operating Company and therefore each of the appellants dealt at less than arm’s length with the Operating Company for the purposes of subsection 160(1). As a result all of the appeals were dismissed with costs.
HLB Smith Holdings v. R. – TCC: Operating company under control of two unrelated directors acting in concert – subsection 160(1) assessments upheldREAD MORE »
Elander v. R. – TCC: Subsection 160(1) assessment not defeated where funds used for household expenses
Oct 18, 2017 By Bill Innes
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Précis: The taxpayer’s husband was a tax debtor. He transferred funds (roughly $62,000) over a period of 5 years either into their joint account or the taxpayer’s personal account. The funds were primarily used for normal household expenses, including mortgage payments on the home which was owned by the taxpayer. The taxpayer argued, unsuccessfully, that $9,500 of the amount at issue had been taken back by her husband immediately and used in his law practice. As to the balance of the funds the taxpayer argued that she gave adequate consideration by providing her husband with a home and necessities. Relying on the prior Federal Court of Appeal decision in Yates, the Tax Court dismissed the appeal holding that the provision of basic necessities did not constitute “consideration” for the purposes of subsection 160(1) of the Income Tax Act. Costs were awarded to the Crown.
Elander v. R. – TCC: Subsection 160(1) assessment not defeated where funds used for household expensesREAD MORE »
Brassard v. R. – FCA: Court of Appeal declines to set aside subsection 160(1) assessment
Oct 17, 2017 By Bill Innes
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Précis: Mr. Brassard’s brother transferred a piece of land with a mobile home to him at a time when he had tax arrears. CRA assessed Mr. Brassard roughly $66,000 as the value of the property less what he had paid for it (which CRA assumed was $50,000). Mr. Brassard lost in the Tax Court and appealed to the Federal Court of Appeal. Mr. Brassard essentially argued that CRA’s valuation of the property was incorrect and attempted to rely upon other evidence of value. The Court of Appeal held that there was no reversible error on the evidence and dismissed the appeal with costs.
Brassard v. R. – FCA: Court of Appeal declines to set aside subsection 160(1) assessmentREAD MORE »
Klundert v. R. - FCA: Mrs. Klundert’s subsection 160(1) appeal dismissed from the Bench
Jul 14, 2017 By Bill Innes
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Précis: This is likely almost the tail end of the Klundert saga. Mrs. Klundert’s husband, a tax protester optometrist, directed Ontario Health Insurance Plan payments to her bank account at a time when he owed substantial amounts of in income tax. CRA assessed Mrs. Klundert pursuant to subsection 160(1) and she appealed unsuccessfully to the Tax Court. She appealed to the Federal Court of Appeal and her appeal was dismissed from the Bench, with costs.
Klundert v. R. - FCA: Mrs. Klundert’s subsection 160(1) appeal dismissed from the BenchREAD MORE »
Yu v. R. - TCC: Funds transferred by wife’s sister (and taxpayer’s former wife) not trust funds - subsection 160(1) applied
Feb 21, 2017 By Bill Innes
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Précis: The taxpayer received $119,500 in 2010 in four tranches from his wife’s sister, Yan Siang Yu (who was also his former wife). Yan Siang Yu had a large tax debt arising from a net worth assessment of a marijuana grow operation at a Vancouver house on West 53rd Avenue owned by her. The taxpayer argued that the money was placed by his mother-in-law, Jiao Zhen Huang, with his sister-in-law, Yan Siang Yu, for the benefit of his wife and their son when his mother-in-law sold her house on West 46th Avenue in Vancouver.
Yu v. R. - TCC: Funds transferred by wife’s sister (and taxpayer’s former wife) not trust funds - subsection 160(1) appliedREAD MORE »
McKay v. R. - TCC: Subsection 160(1) assessment sustained based on common law relationship
Oct 27, 2016 By Bill Innes
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Précis: The appellant was assessed pursuant to subsection 160(1) of the Income Tax Act with respect to the transfer of a 2008 Cadillac Escalade to her by Mr. Henry Wetelainen. The sole question before the Court was whether the taxpayer and Mr. Wetelainen were in a common law relationship that would be subject to the provisions of subsection 160(1). After a lengthy review of the facts and the law the Court concluded that they were in a common law relationship and dismissed the taxpayer’s appeal with costs to CRA.
McKay v. R. - TCC: Subsection 160(1) assessment sustained based on common law relationshipREAD MORE »
Kvas v. R. - TCC: No subsection 160(1) transfer to shareholders from dissolved corporation
Sep 22, 2016 By Bill Innes
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Précis: This case involved the appeals of the Kvas brothers from subsection 160(1) assessments alleging that each of them had received transfers of property on or about December 31, 2008 from Commercial Interior Alterations Inc. (“CIA”), a corporation of which they had been the shareholders. The difficulty was that CIA had been dissolved in January of 2008, i.e., roughly 11 months before the alleged transfers and 6 years before the issuance of the assessments. The Tax Court was asked to determine whether subsection 160(1) assessments could be raised in respect of a transfer from a non-existent entity.
Kvas v. R. - TCC: No subsection 160(1) transfer to shareholders from dissolved corporationREAD MORE »

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