Section 160 and Director Liability

In R v Colitto, 2020 FCA 70, rev’g 2019 TCC 88, the Court considered when the liability of a director arises under section 227.1 of the Income Tax Act (Canada) (the “Act”) for the purposes of section 160 of the Act.

In 2008, the taxpayer’s husband was the director of a corporation that had failed to remit source deductions. In that year, he transferred real property to the taxpayer for inadequate consideration. The CRA, in 2011, issued a director liability assessment to the husband. In 2016, the CRA assessed the taxpayer under section 160.

The Tax Court had found that the husband’s liability did not arise until 2011 when the conditions in subsection 227.1(2) were met so that section 160 did not apply to the taxpayer. The husband had not made any transfers to her at a time when he owed tax. The Federal Court of Appeal, however, found that the husband’s liability arose “in respect of” 2008 so that his transfers of property to the spouse, and the spouse herself, were caught by section 160.

Philip Friedlan and Adam Friedlan “Colitto Reversed: Section 160 Applies to a Director’s Liability in or in Respect of the Year That the Failure Occurs” 20:3 Tax for the Owner-Manager (July 2020)

Print Friendly, PDF & Email

Leave a Reply

Your email address will not be published. Required fields are marked *