Assume that Corp X owes tax to the CRA. Assume that, while it owes that tax, Corp X pays a dividend to Mr. X who deals not at arm’s length with the corporation. What can the CRA do about it (assuming that the corporation is then unable to pay the tax it owes)? It is well established that the CRA can issue an assessment to Mr. X under section 160 of the Income Tax Act (Canada). For a recent case affirming this rule, see Larouche c. La Reine, 2008 CCI 448.
