Income Tax Act

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

• 160 (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 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 therefor, and

  • (e) the transferee and transferor are jointly and severally 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 in or in respect of the taxation year in which the property was transferred or any preceding taxation year,

  but nothing in this subsection shall be deemed to limit the liability of the transferor under any other provision of this Act.

• Marginal note:Joint liability where s. 69(11) applies

  (1.1) Where 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 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 under this subsection is deemed to limit the liability of the other taxpayer under any other provision of this Act.

• Marginal note:Joint liability — tax on split income

  (1.2) A parent of a specified individual is jointly and severally liable with the individual for the amount required to be added because of subsection 120.4(2) in computing the specified individual’s tax payable under this Part for a taxation year if, during the year, the parent

  • (a) carried on a business that purchased goods or services from a business the income of which is directly or indirectly included in computing the individual’s split income for the year;

  • (b) was a specified shareholder of a corporation that purchased goods or services from a business the income of which is directly or indirectly included in computing the individual’s split income for the year;

  • (c) was a specified shareholder of a corporation, dividends on the shares of the capital stock of which were directly or indirectly included in computing the individual’s split income for the year;

  • (d) was a shareholder of a professional corporation that purchased goods or services from a business the income of which is directly or indirectly included in computing the individual’s split income for the year; or

  • (e) was a shareholder of a professional corporation, dividends on the shares of the capital stock of which were directly or indirectly included in computing the individual’s split income for the 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 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.

• Marginal note:Discharge of liability

  (3) Where a particular taxpayer has become jointly and severally liable with another taxpayer under this section 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 the joint 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 liable.

• Marginal note:Fair market value of undivided interest

  (3.1) For the purposes of this section and section 160.4, the fair market value at any time of an undivided interest in a property, expressed as a proportionate interest 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.