Income Tax Act (R.S.C., 1985, c. 1 (5th Supp.))

Marginal note:Interpretation

• 160 (0.1) In this section and section 160.01, a transaction includes an arrangement or event.

• Marginal note:Tax liability re property transferred not at arm’s length

  (1) Where a person has, on or after May 1, 1951, transferred property, either directly or indirectly, by means of a trust or by any other means whatever, to

  • (a) the person’s spouse or common-law partner or a person who has since become the person’s spouse or common-law partner,

  • (b) a person who was under 18 years of age, or

  • (c) a person with whom the person was not dealing at arm’s length,

  the following rules apply:

  • (d) the transferee and transferor are jointly and severally, or solidarily, liable to pay a part of the transferor’s tax under this Part for each taxation year equal to the amount by which the tax for the year is greater than it would have been if it were not for the operation of sections 74.1 to 75.1 of this Act and section 74 of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, in respect of any income from, or gain from the disposition of, the property so transferred or property substituted for it, and

  • (e) the transferee and transferor are jointly and severally, or solidarily, liable to pay under this Act an amount equal to the lesser of

    • (i) the amount, if any, by which the fair market value of the property at the time it was transferred exceeds the fair market value at that time of the consideration given for the property, and

    • (ii) the total of all amounts each of which is an amount that the transferor is liable to pay under this Act (including, for greater certainty, an amount that the transferor is liable to pay under this section, regardless of whether the Minister has made an assessment under subsection (2) for that amount) in or in respect of the taxation year in which the property was transferred or any preceding taxation year,

  but nothing in this subsection limits the liability of the transferor under any other provision of this Act or of the transferee for the interest that the transferee is liable to pay under this Act on an assessment in respect of the amount that the transferee is liable to pay because of this subsection.

• Marginal note:Joint and several, or solidary, liability — subsection 69(11)

  (1.1) If a particular person or partnership is deemed by subsection 69(11) to have disposed of a property at any time, the person referred to in that subsection to whom a benefit described in that subsection was available in respect of a subsequent disposition of the property or property substituted for the property is jointly and severally, or solidarily, liable with each other taxpayer to pay a part of the other taxpayer’s liabilities under this Act in respect of each taxation year equal to the amount determined by the formula

  A - B

  where

  A

  is the total of amounts payable under this Act by the other taxpayer in respect of the year, and

  B

  is the amount that would, if the particular person or partnership were not deemed by subsection 69(11) to have disposed of the property, be determined for A in respect of the other taxpayer in respect of the year,

  but nothing in this subsection limits the liability of the other taxpayer under any other provision of this Act or of any person for the interest that the person is liable to pay under this Act on an assessment in respect of the amount that the person is liable to pay because of this subsection.

• Marginal note:Joint and several, or solidary, liability — tax on split income

  (1.2) If an amount is required to be added because of subsection 120.4(2) in computing a specified individual’s tax payable under this Part for a taxation year and the specified individual has not attained the age of 24 years before the start of the year, the following rules apply:

  • (a) subject to paragraph (b), a particular individual is jointly and severally, or solidarily, liable with the specified individual for the amount if

    • (i) where the specified individual has not attained the age of 17 years before the year, the particular individual is a parent of the specified individual, and

    • (ii) where the specified individual has attained the age of 17 years before the year,

      • (A) the particular individual is a source individual in respect of the specified individual,

      • (B) the amount was derived directly or indirectly from a related business (within the meaning of paragraph 120.4(1.1)(d)) in respect of the specified individual, and

      • (C) the particular individual meets the conditions in any of paragraphs (a) to (c) in the definition related business in subsection 120.4(1) in respect of the related business;

  • (b) the particular individual’s liability under paragraph (a) in respect of the specified individual for the year is to be determined as though the only amounts included in the specified individual’s split income for the year are amounts derived from the related business referred to in subparagraph (a)(ii); and

  • (c) nothing in this subsection limits the liability of

    • (i) the specified individual under any other provision of this Act, or

    • (ii) the particular individual for the interest that the particular individual is liable to pay under this Act on an assessment in respect of the amount that the particular individual is liable to pay because of this subsection.

• Marginal note:Joint liability — tax on split-pension income

  (1.3) Where a pensioner and a pension transferee (as those terms are defined in section 60.03) make a joint election under section 60.03 in respect of a split-pension amount (as defined in that section) for a taxation year, they are jointly and severally, or solidarily, liable for the tax payable by the pension transferee under this Part for the taxation year to the extent that that tax payable is greater than it would have been if no amount were required to be added because of paragraph 56(1)(a.2) in computing the income of the pension transferee under this Part for the taxation year.

• Marginal note:Joint liability — spousal and similar trusts

  (1.4) If subsection 104(13.4) deems an amount to have become payable in a taxation year of a trust to an individual, the individual and the trust are jointly and severally, or solidarily, liable for the tax payable by the individual under this Part for the individual’s taxation year that includes the day on which the individual dies to the extent that that tax payable is greater than it would have been if the amount were not included in computing the individual’s income under this Part for the taxation year.

• Marginal note:Assessment

  (2) The Minister may at any time assess a taxpayer in respect of any amount payable because of this section, and the provisions of this Division (including, for greater certainty, the provisions in respect of interest payable) apply, with any modifications that the circumstances require, in respect of an assessment made under this section as though it had been made under section 152 in respect of taxes payable under this Part.

• Marginal note:Assessment

  (2.1) The Minister may at any time assess a taxpayer in respect of any amount payable because of paragraph 94(3)(d) or (e) or subsection 94(17) and the provisions of this Division (including, for greater certainty, the provisions in respect of interest payable) apply, with any modifications that the circumstances require, in respect of an assessment made under this section as though it had been made under section 152 in respect of taxes payable under this Part.

• Marginal note:Discharge of liability

  (3) If a particular taxpayer has become jointly and severally, or solidarily, liable with another taxpayer under this section or because of paragraph 94(3)(d) or (e) or subsection 94(17) in respect of part or all of a liability under this Act of the other taxpayer,

  • (a) a payment by the particular taxpayer on account of that taxpayer’s liability shall to the extent of the payment discharge their liability; but

  • (b) a payment by the other taxpayer on account of that taxpayer’s liability discharges the particular taxpayer’s liability only to the extent that the payment operates to reduce that other taxpayer’s liability to an amount less than the amount in respect of which the particular taxpayer is, by this section, made jointly and severally, or solidarily, liable.

• Marginal note:Fair market value of undivided interest or right

  (3.1) For the purposes of this section and section 160.4, the fair market value at any time of an undivided interest, or for civil law an undivided right, in a property, expressed as a proportionate interest or right in that property, is, subject to subsection (4), deemed to be equal to the same proportion of the fair market value of that property at that time.

• Marginal note:Special rules re transfer of property to spouse or common-law partner

  (4) Notwithstanding subsection 160(1), where at any time a taxpayer has transferred property to the taxpayer’s spouse or common-law partner pursuant to a decree, order or judgment of a competent tribunal or pursuant to a written separation agreement and, at that time, the taxpayer and the spouse or common-law partner were separated and living apart as a result of the breakdown of their marriage or common-law partnership, the following rules apply:

  • (a) in respect of property so transferred after February 15, 1984,

    • (i) the spouse or common-law partner shall not be liable under subsection 160(1) to pay any amount with respect to any income from, or gain from the disposition of, the property so transferred or property substituted therefor, and

    • (ii) for the purposes of paragraph 160(1)(e), the fair market value of the property at the time it was transferred shall be deemed to be nil, and

  • (b) in respect of property so transferred before February 16, 1984, where the spouse common-law partner would, but for this paragraph, be liable to pay an amount under this Act by virtue of subsection 160(1), the spouse’s or common-law partner’s liability in respect of that amount shall be deemed to have been discharged on February 16, 1984,

  but nothing in this subsection shall operate to reduce the taxpayer’s liability under any other provision of this Act.

• Marginal note:Anti-avoidance rules

  (5) For the purposes of subsections (1) to (4), if a person (referred to in this section as the “transferor”) has transferred property either directly or indirectly, by means of a trust or by any other means whatever to another person (referred to in this section as the “transferee”) in a transaction or as part of a series of transactions

  • (a) the transferor is deemed to not be dealing at arm’s length with the transferee at all times in the transaction or series of transactions if

    • (i) at any time during the period beginning immediately prior to the transaction or series of transactions and ending immediately after the transaction or series of transactions, the transferor and transferee do not deal at arm’s length, and

    • (ii) it is reasonable to conclude that one of the purposes of undertaking or arranging the transaction or series of transactions is to avoid joint and several, or solidary, liability of the transferee and transferor for an amount payable under this Act;

  • (b) an amount that the transferor is liable to pay under this Act (including, for greater certainty, an amount that the transferor is liable to pay under this section, regardless of whether the Minister has made an assessment under subsection (2) for that amount) is deemed to have become payable in the taxation year in which the property was transferred if it is reasonable to conclude that one of the purposes for the transfer of property is to avoid the payment of a future amount payable under this Act by the transferor or transferee; and

  • (c) the amount determined under subparagraph (1)(e)(i) is deemed to be the greater of

    • (i) the amount otherwise determined under that subparagraph without reference to this paragraph, and

    • (ii) the amount determined by the formula

      A − B

      where

      A

      is the fair market value of the property at the time of the transfer, and

      B

      is

      • (A) the lowest fair market value of the consideration (that is held by the transferor) given for the property at any time during the period beginning immediately prior to the transaction or series of transactions and ending immediately after the transaction or series of transactions, or

      • (B) if the consideration is in a form that is cancelled or extinguished during the period referred to in clause (A),

        • (I) the amount that is the lowest of the amount determined in clause (A) and the fair market value during the period of any property, other than property that is cancelled or extinguished during the period, that is substituted for the consideration referred to in clause (A), or

        • (II) if there is no property that is substituted for the consideration referred to in clause (A), other than property cancelled or extinguished during the period, nil.