Corporation’s tax debt was not executed and returned unsatisfied

Tax - Income Tax - Tax Avoidance

Taxpayer’s husband was director of corporation. In same taxation year, 2008, that corporation failed to remit source deductions to Minister, husband transferred 50 per cent interest in two real properties to taxpayer. As result of corporation’s failure to remit source deductions to Minister, Minister issued Notice of Assessment for unremitted source deductions, interest and penalties in 2008. In 2009, corporation’s debt was registered in Federal Court, in 2010, there was direction to enforce writ, in 2011, corporation’s debt was executed and returned unsatisfied and husband was issued s. 227.1 Income Tax Act assessment and in 2016, taxpayer was issued s. 160 Act assessment. Taxpayer appealed Minister’s s. 160 Income Tax Act assessment. Appeals allowed. For purposes of s. 160(1)(e)(ii) of Act, transferor’s liability under Act could arise after exact point-in-time of transfer, provided that it was “in or in respect of taxation year” of transfer. Corporation, whose tax liability was grafted onto husband by virtue of s. 227.1 of Act, was neither transferor nor transferee of any property under s. 160 of Act. Corporation’s tax debt was not executed and returned unsatisfied in compliance of Act by Minister until 2011, and was not in respect of his 2008 taxation year. As taxpayer was only liable pursuant to s. 160(1)(e)(ii) of Act if husband’s liability under s. 227.1 of Act was “in or in respect” of his 2008 taxation year, it was found that taxpayer was not liable pursuant to s. 160 of Act in respect of assessments.

Colitto v. The Queen (2019), 2019 CarswellNat 1465, 2019 TCC 88, Henry A. Visser J. (T.C.C. [General Procedure]).

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