Section 160 and FMV Consideration

A dental professional corporation (the vendor) sold its professional practice to an arm’s length purchaser. Some of the proceeds from the sale were paid to the shareholder of the corporation (the dentist) who used the funds to pay obligations of the vendor. The CRA assessed the dentist under section 160 respecting the funds she received.

The only issue for the TCC was the fourth requirement in Canada v Livingston, 2008 FCA 89: did the fair market value of the property transferred to the dentist exceed the consideration she gave for it? Boyle J held that it did not because the funds were transferred subject to the requirement that they be used to pay obligations of the vendor. The dentist had, in effect, assumed the vendor’s debts so that section 160 could not apply.

Summary of Muir v R, 2020 TCC 8 (informal procedure), in Philip Friedlan and Adam Friedlan “Muir: Applying Section 160 When the Minister’s Collection Powers Have Not Been Stymied” 20:2 Tax for the Owner-Manager (April 2020)

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