Section 325 and Joint Bank Accounts

In White v R, 2020 TCC 22, the taxpayer’s husband owed tax debts under the Excise Tax Act at a time when he made deposits to their joint bank account. The issue was whether the taxpayer was liable under section 325 of the Excise Tax Act in respect of the deposits.

The Court held that the husband did not transfer property to the taxpayer merely be depositing money to the joint account. The taxpayer had not divested himself of the money because the account was joint. The husband divested himself of the money only to the extent the spouse withdrew the money and used it for some purpose of her own. In fact, the taxpayer did withdraw money that she deposited to her own account, used to pay down a personal line of credit and used to pay down a mortgage on a house that was in her name only. To that extent, the taxpayer was liable under section 325.

Rebecca D. Loo and Robert G. Kreklewetz “Third-Party Liability for Non-Arm’s-Length Transfers” 20:3 Tax for the Owner-Manager (July 2020)

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