Subsection 160(4) of the Income Tax Act (Canada) in effect provides an exception to the “long arm” of section 160
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,
What is a “written separation agreement”? Justice Bedard, in Carrière v R, 2006 TCC 289, took a rather narrow view of the matter:
[6] In short, the only question I must decide is the following: whether the mere statement in the deed of gift that the Appellant and Mr. Messier had been separated and living apart since October 1994 can in itself be a written separation agreement within the meaning of subsection 160(4) of the Act. In my opinion, it is not because the parties were separated and living apart that one can interpret the deed of gift as being a written separation agreement and attribute to it this quality it clearly does not have based on its very wording. It is not at all apparent to me how this mere statement in the deed of gift can constitute a transfer of property pursuant to a written separation agreement. The submissions of counsel for the Appellant are simply not supported by the facts. In my opinion, a written separation agreement must include, generally speaking, provisions in writing for the custody and support of children, alimony and property division made by couples who are usually seeking a divorce or legal separation. The deed of gift under which the land was transferred does not contain any written provision therefor.
As a result, the exception to section 160 did not apply and the wife was liable for her husband’s tax debt at the time of the transfer.
