Tax liability re property transferred not at arm’s length

Legislative history

Subsection 160(1) applies to transfers made on or after 1 May 1951. Before the 1985 revision, S.C. 1980-81-82-83, c. 140, s. 107, extended the rule beyond transfers between family members and, for the first time, credited the transferee with the consideration it gave; until then the liability was the lesser of the transferor’s tax and the value of the property (Microbjo, para. 95). A further amendment was made by S.C. 1987, c. 46, s. 52 (1455257 Ontario, para. 45). The consolidated record on Justice Laws discloses the following amendments to the revised section:

• S.C. 1998, c. 19, s. 186; S.C. 2000, c. 12, s. 142; S.C. 2000, c. 19, s. 46; S.C. 2000, c. 30, s. 170. These amendments predate the Justice Laws point-in-time series for section 160, which begins on 31 August 2004. The Modernization of Benefits and Obligations Act, S.C. 2000, c. 12, extended references to spouses throughout the Act to common-law partners (Enns, para. 41). Changes to be described
• S.C. 2007, c. 29, s. 23 (Budget Implementation Act, 2007, royal assent 22 June 2007). Subsection 160(1.3) was added, making the pensioner and the pension transferee jointly liable for the additional tax of the pension transferee resulting from a split-pension election under section 60.03.
• S.C. 2013, c. 34, ss. 16, 141, and 313 (Technical Tax Amendments Act, 2012, in the consolidation from 26 June 2013). The words “or solidarily” were added throughout. Subparagraph 160(1)(e)(ii) was extended to include, for greater certainty, an amount the transferor is liable to pay under section 160 “regardless of whether the Minister has made an assessment”. The closing words of subsections (1) and (1.1) were rewritten so that nothing limits the transferee’s liability for interest on its own assessment, a change the Federal Court of Appeal has said settled that interest accrues on a section 160 assessment (1455257 Ontario, para. 50). Subsection (1.2) was revised. Subsection (2) was amended to refer expressly to the interest provisions and to “taxes payable under this Part”. Subsection (2.1) was added, subsection (3) was extended to liabilities under paragraphs 94(3)(d) and (e) and subsection 94(17), and subsection (3.1) was extended to an undivided right in civil law.
• S.C. 2014, c. 39, s. 57 (Economic Action Plan 2014 Act, No. 2, in the consolidation from 16 December 2014). Subsection 160(1.4) was added (spousal and similar trusts, subsection 104(13.4)).
• S.C. 2018, c. 12, s. 26 (Budget Implementation Act, 2018, No. 1, in the consolidation from 21 June 2018). Subsection 160(1.2) was replaced. Liability for tax on split income now applies where the specified individual has not attained 24 years of age before the start of the year: a parent is liable where the individual had not attained 17 years before the year, and a source individual meeting the related-business conditions is liable where the individual had.
• S.C. 2022, c. 19, s. 38 (Fall Economic Statement Implementation Act, 2022, royal assent 15 December 2022). Subsection 160(0.1) and the anti-avoidance rules in subsection 160(5) were added, and the French version of paragraphs 160(1)(d) and (e) was amended. Subsection 38(5) deems these amendments to have come into force on 19 April 2021. The same Act enacted section 160.01, a penalty for section 160 avoidance planning, which applies to a transaction or series of transactions that occurs, all or in part, after 18 April 2021. These measures implement the “Avoidance of Tax Debts” proposals in the 2021 federal budget, which were to apply to transfers on or after Budget Day.
• S.C. 2024, c. 15, s. 50 (Fall Economic Statement Implementation Act, 2023, royal assent 20 June 2024). Subsection 160(1.5) was added (joint liability where a disposition for which a joint election was made under paragraph 84.1(2.31)(h) or (2.32)(i) fails the conditions of those subsections). It came into force, or is deemed to have come into force, on 1 January 2024 (s. 50(2)).
• S.C. 2024, c. 17, s. 80(97) (Budget Implementation Act, 2024, No. 1, royal assent 20 June 2024). A coordinating amendment, operative because Bill C-59 received royal assent (s. 80(1)), added subsection 160(1.6) (qualifying business transfers under section 110.61), deemed to have come into force on 1 January 2024 (s. 80(201)).
• S.C. 2026, c. 3, s. 75 (Budget 2025 Implementation Act, No. 1, royal assent 26 March 2026). Subsection 160(1.7) was added (qualifying cooperative conversions under section 110.62), deemed to have come into force on 1 January 2024 (s. 75(2)). This is the amendment reflected in the current consolidation from 26 March 2026.

Transfers made before 19 April 2021 are governed by the text without subsection 160(5), which can be read under “Historic text” above. Application and coming-into-force rules are not part of the consolidation and must be read in the amending Acts.

Clause 55 of the Department of Finance’s May 2026 Notice of Ways and Means Motion would replace the opening words of subsection 160(5) so that it applies “for the purposes of this section”, and would add subsections 160(6) to (8): a deemed transfer where a planner transfers property to the transferee (or a person not dealing at arm’s length with the transferee) and, in the same transaction or series, the tax debtor transfers property to the planner or another person, where one of the purposes is to avoid joint liability; and a deemed nil value for the transferee’s consideration in a section 160 avoidance transaction. The amendments would apply to transactions or series that occur on or after 16 April 2024. They are not enacted.

Interpretation and application →

Interpretation and application

The Federal Court of Appeal has settled four cumulative conditions for subsection 160(1): the transferor must be liable to pay tax under the Act at the time of the transfer; there must be a transfer of property, directly or indirectly, by means of a trust or by any other means whatever; the transferee must be the transferor’s spouse or common-law partner (or a person who has since become one), a person under 18 years of age, or a person with whom the transferor was not dealing at arm’s length; and the fair market value of the property must exceed the fair market value of the consideration given by the transferee (Livingston, para. 17; Eyeball, para. 44; Csak, para. 4). Liability arises by operation of law at the moment of the transfer, not on assessment (Heavyside; Wannan, para. 12). The provision applies objectively, whatever the parties’ intentions and even to a transferee who knows nothing of the transferor’s tax affairs (Wannan, para. 3; Eyeball, paras. 2 and 39; Microbjo, para. 75; 9101-2310 Québec, para. 36), although an improper motive, if present, can inform how the transactions are viewed (Livingston, para. 19; Eyeball, para. 39).

Transfer of property

“Property” is defined in subsection 248(1) to include a right of any kind and money (Eyeball, para. 43). A deposit of funds into another person’s bank account is a transfer, because the account holder acquires the right to require the bank to pay out the funds; it does not matter that beneficial ownership did not pass, that the transferee obtained no benefit, or that the money went back to the transferor (Livingston, paras. 21–22 and 24). Contributions by one spouse to the other’s registered retirement savings plan are transfers (Wannan, para. 4). A cash dividend is a transfer without consideration, and so is a stock dividend followed by the redemption of the shares issued (594710 British Columbia, paras. 112–115, applying Algoa Trust). The introductory words capture a transfer that results from the combined effect of several transactions, but they identify the transfer; they do not govern how the consideration is valued (Eyeball, paras. 48, 50, and 56–57). Property may pass in two steps, from the tax debtor to a first transferee and from that transferee to a second, each of which can engage the provision (Harvard Properties, para. 24, citing Jurak v. Canada, 2003 FCA 58). The payment of a bona fide debt does not engage subsection 160(1) (Eyeball, para. 63; Harvard Properties, para. 64).

Whether ownership has passed is a matter of provincial private law, which plays a suppletive role (9101-2310 Québec, para. 44). The Court there read Livingston as a common-law rule that a transfer of legal title to money may suffice where it conceals the tax debtor’s beneficial ownership, and held that the rule does not apply in Quebec, where funds held by a mandatary remained part of the tax debtor’s patrimony (paras. 53–55 and 61). The assessment was nevertheless upheld because the parties had simulated a transfer, and the Minister, as a third person in good faith, could rely on the apparent contract under article 1452 of the Civil Code of Québec (paras. 34–35 and 41).

Designated transferees

The transferee must fall within paragraph 160(1)(a), (b), or (c). In Enns, a surviving spouse who received the deceased’s registered retirement savings plan as designated beneficiary, outside the estate, was held not to be the deceased’s “spouse” for paragraph 160(1)(a), because marriage and common-law partnership both end on death (paras. 22, 46–47, and 60). The assessment in that case rested on paragraph (a) alone (para. 5).

Related persons are deemed not to deal at arm’s length by section 251; for other persons, paragraph 251(1)(c) makes it a question of fact whether they dealt at arm’s length at the time of the transfer (Microbjo, para. 60). All facts bearing on the relationship at that time must be considered, including earlier transactions (para. 61). In Microbjo, vendors who sold subsidiaries to a promoter for a price that divided between them the funds needed to pay the subsidiaries’ tax were held not to deal at arm’s length with the promoter: they were splitting money that was not theirs, and the price was far removed from what the risks assumed would justify (paras. 81–90). In Harvard Properties, by contrast, the vendor sold at a price supported by a contemporaneous sale of the underlying property to a third party, received no premium, and shared in no unpaid tax, and so dealt at arm’s length (paras. 47–54). A person who lets a tax debtor use its bank account as a front acts in concert with the tax debtor and does not deal at arm’s length (9101-2310 Québec, para. 39). The CRA summarizes the judicial criteria (a common mind directing the bargaining, parties acting in concert without separate interests, and de facto control) in Income Tax Folio S1-F5-C1, ¶1.38.

Consideration and fair market value

The transferee’s liability under paragraph 160(1)(e) is the lesser of two amounts. The first is the excess of the fair market value of the property “at the time it was transferred” over the fair market value “at that time” of the consideration given for it (subparagraph (e)(i)). Both values are fixed at the moment of transfer, not by the overall result of a series; the adequacy of consideration is measured by “a ‘snapshot’ taken at the point in time when the transfer takes place” (Eyeball, paras. 52–53 and 58; Harvard Properties, para. 61). The property is valued as it stood in the transferor’s hands, and the consideration as it stood in the transferee’s hands (Eyeball, paras. 67–68). The words “consideration given” refer to what the transferee gives, whether or not it reaches the transferor, and limit the transferee’s liability to “the monetary advantage that they derive from the transfer” (Microbjo, para. 95; Harvard Properties, para. 56).

The value of any consideration must be analysed, not merely its existence found (Livingston, para. 28), and an act done out of a sense of moral obligation, without a binding agreement, is not consideration (para. 29). Partial consideration reduces the liability (Jefferson, para. 8). The assessment is based on the fair market value of the property, not its value net of the tax the transferee will pay to realize it (Enns, para. 57), but an arm’s-length purchaser of shares would discount the corporation’s existing tax liability (Microbjo, para. 91). A contemporaneous sale of the underlying property to a third party is highly probative of value (Harvard Properties, para. 45). For a transfer made as part of a series on or after 19 April 2021, paragraph 160(5)(c) qualifies the snapshot rule (see “Anti-avoidance rules” below).

The transferor’s liability

The second amount is the total of the amounts the transferor is liable to pay “under this Act” in or in respect of the taxation year of the transfer or any preceding taxation year (subparagraph 160(1)(e)(ii)). It is not confined to Part I tax, and it includes, for greater certainty, the transferor’s own liability under section 160, whether or not assessed, so that liability can pass along a chain of transfers. Because liability for tax results from the Act and not from the assessment (Heavyside), the transferor’s liability for the year of the transfer counts even if it is assessed later; by its terms, the provision applies where the transfer occurs in the same taxation year as the liability arises or a later one (594710 British Columbia, para. 120). The transferee is liable for the interest that accrues on the transferor’s liability up to the date of the section 160 assessment (1455257 Ontario, paras. 47–49), and, under the closing words of subsection 160(1) and subsection 160(2), for interest on its own assessment after that date (para. 50). The transferor’s liability cannot be reduced in the transferee’s appeal by a loss carry-back the transferor never requested (paras. 32–43). The transferee’s liability survives the transferor’s bankruptcy and discharge (Heavyside; Wannan, paras. 12 and 22).

Income attribution

Paragraph 160(1)(d) makes the transferee jointly and severally liable for the part of the transferor’s Part I tax for each year that results from the operation of sections 74.1 to 75.1 (and section 74 of the former Act) on income or gains from the transferred property or property substituted for it. It is a distinct rule and does not depend on any shortfall in consideration. The CRA described it in archived Interpretation Bulletin IT-511R, para. 37.

Other joint liability rules

Subsections 160(1.1) to 160(1.7) impose joint and several liability in defined settings without any transfer for inadequate consideration. Under subsection (1.1), where a person or partnership is deemed by subsection 69(11) to have disposed of property, the person to whom the benefit described there was available is liable for the increase in other taxpayers’ liabilities caused by the deemed disposition. Under subsection (1.2), a parent or a source individual is liable for tax on split income under subsection 120.4(2) of a specified individual under 24, with the liability determined as though the specified individual’s only split income were amounts derived from the related business referred to in subparagraph (1.2)(a)(ii) (paragraph (1.2)(b)). Under subsection (1.3), a pensioner and a pension transferee who elect under section 60.03 are liable for the pension transferee’s additional tax. Under subsection (1.4), an individual and a trust are liable for the individual’s additional tax for the year of death where subsection 104(13.4) deems an amount payable to the individual. Under subsections (1.5), (1.6), and (1.7), the parties to a joint election under paragraph 84.1(2.31)(h) or (2.32)(i), paragraph 110.61(1)(e), or paragraph 110.62(1)(e) (and, under subsection (1.7), the subject corporation) are liable for the taxpayer’s tax to the extent it exceeds what it would have been had the disposition satisfied the relevant conditions; subsections (1.6) and (1.7) apply only where paragraph 110.61(4)(a) or 110.62(4)(a), as the case may be, applies. Subsections (2.1) and (3) extend the assessment and discharge rules to liabilities under paragraphs 94(3)(d) and (e) and subsection 94(17).

Assessment and the right to challenge the primary assessment

Subsection 160(2) permits the Minister to assess “at any time” and applies the provisions of Division I, including those on interest, as though the assessment had been made under section 152. There is no limitation period. The Supreme Court held that reading one into section 160 was an error, and that the length of the delay before an assessment does not ground judicial review, although mandamus might be available to prompt the Minister to act once an objection has been filed; challenges belong in the Tax Court (Addison & Leyen, paras. 9–11). The provision applies without any time limitation and regardless of what has happened to the property since the transfer (9101-2310 Québec, para. 60). In Csak, a transfer made in 1993 was assessed in 2012 (paras. 2 and 4).

Because the assessment is treated as one made under section 152, the transferee may object under section 165 and appeal under section 169. The transferee is not bound by proceedings between the Minister and the transferor and may raise any defence the transferor could have raised against the primary assessment, including that it was statute-barred (Gaucher, paras. 6–9 and 13; Wannan, para. 20; 594710 British Columbia, para. 5; Csak, paras. 11–15). The transferee has no greater rights than the transferor would have had (594710 British Columbia, para. 95). A challenge may amount to an abuse of process in some cases, but not where the transferee was not a party to the earlier litigation and the issue raised was not decided in it (Csak, paras. 17 and 21–23).

Discharge and undivided interests

Under subsection 160(3), a payment by the transferee discharges its liability to the extent of the payment, while a payment by the transferor discharges the transferee’s liability only to the extent that it reduces the transferor’s liability below the amount for which the transferee is liable. Absent a direction or agreement, the Crown may apply a payment from the transferor’s bankruptcy trustee to the most recent of the transferor’s liabilities, leaving the transferee exposed for earlier years (Wannan, paras. 29–36). Subsection 160(3.1) deems the fair market value of an undivided interest or right to be the same proportion of the value of the whole property, subject to subsection (4), for section 160 and section 160.4.

Breakdown of marriage or common-law partnership

Subsection 160(4) applies, notwithstanding subsection (1), to a transfer to a spouse or common-law partner under a decree, order, or judgment of a competent tribunal or under a written separation agreement where, at the time of the transfer, the parties were separated and living apart because of the breakdown of the relationship. For transfers after 15 February 1984, the transferee is not liable under subsection (1) in respect of income or gains from the property, and the fair market value of the property is deemed to be nil for paragraph (1)(e). For earlier transfers, the liability is deemed to have been discharged on 16 February 1984. The transferor’s own liability is not reduced.

Anti-avoidance rules

Subsection 160(0.1) provides that, in section 160 and section 160.01, a transaction includes an arrangement or event. Subsection 160(5) applies, for the purposes of subsections (1) to (4), where property is transferred in a transaction or as part of a series of transactions. Paragraph (a) deems the transferor and transferee not to deal at arm’s length at all times in the transaction or series if they did not deal at arm’s length at any time from immediately before to immediately after it, and it is reasonable to conclude that one of the purposes was to avoid joint liability. Paragraph (b) deems an amount the transferor is liable to pay (including an unassessed section 160 liability) to have become payable in the year of the transfer, if it is reasonable to conclude that one of the purposes of the transfer is to avoid the payment of a future amount by the transferor or the transferee. Paragraph (c) deems the shortfall under subparagraph (1)(e)(i) to be the greater of the amount otherwise determined and the value of the property at the time of the transfer less the lowest fair market value, during the transaction or series, of the consideration held by the transferor; consideration that is cancelled or extinguished during that period is measured by reference to any property substituted for it or, if there is none, is valued at nil.

The Department of Finance explains that the three paragraphs respond, respectively, to planning that avoids the non-arm’s-length requirement, planning that avoids the requirement of an existing tax debt in or before the year of transfer, and planning that reduces the value of the consideration so as to render the tax debt uncollectible; the nil value is intended to reach a promissory note given as consideration and later cancelled or extinguished for less than its value when given. Unlike paragraphs (a) and (b), paragraph (c) contains no purpose condition on its face. For a transfer made as part of a series on or after 19 April 2021, the consideration is therefore also tested at its lowest value during the series while held by the transferor, and the snapshot rule in Eyeball, decided on a 2002 reorganization, must be read with that qualification. In Microbjo, the Court treated the new deeming rule, as it bears on the facts relevant to arm’s-length status, as confirming the prior law (para. 62). No decision of the Federal Court of Appeal applying subsection 160(5) was found.

Section 160 and the general anti-avoidance rule

The avoidance of a liability under section 160 is a tax benefit for section 245 (594710 British Columbia, para. 109). In that case, an acquisition of control that created a deemed year end between the transfer and the arising of the tax liability frustrated section 160 and was abusive (paras. 120–126). The general anti-avoidance rule did not allow recovery of the part of the tax debt kept by the promoter where the vendors had not undertaken the transactions to avoid section 160 (Microbjo, paras. 97–99), and it did not apply where the parties dealt at arm’s length and full consideration was given (Harvard Properties, paras. 94–96). Separately, section 160.01 imposes a penalty on a person who engages in, participates in, assents to, or acquiesces in planning activity that the person knows, or would reasonably be expected to know but for circumstances amounting to gross negligence, is section 160 avoidance planning. The penalty is the lesser of 50% of the amount whose joint liability was sought to be avoided and the total of $100,000 and the person’s gross entitlements (subsection 160.01(2)); it does not apply to a person solely because the person provided clerical or secretarial services (subsection 160.01(3)).

← Legislative historyPolicy purpose and commentary →

Policy purpose and commentary

The object of section 160 is to prevent a taxpayer from avoiding tax by transferring assets to a spouse or another person described in the section (Heavyside), and so from thwarting the Minister’s efforts to collect (Livingston, para. 18). It preserves the value of the tax debtor’s assets for collection, and it does not apply where fair market value consideration takes the place of the property transferred (para. 27). The Federal Court of Appeal has described its sole purpose as being to “protect the integrity of the tax debtor’s patrimony”, with the result that it does not apply where the patrimony remains intact (9101-2310 Québec, paras. 60–61), and later as protecting the tax authorities against the vulnerability created by non-arm’s-length transfers for less than fair market value (Eyeball, para. 44; Microbjo, para. 80; Harvard Properties, para. 95). It is “a draconian provision” with no due diligence defence (Wannan, para. 3). The Supreme Court nonetheless described it, quoting with approval the dissenting reasons of Rothstein J.A. below, as narrowly targeted at transfers to persons in specified relationships for less than fair market value (Addison & Leyen, para. 9), and the cap on the transferee’s liability has been said to strike the right balance for a collection measure (1455257 Ontario, para. 48).

In “Avoidance of Tax Debts”, the 2021 federal budget described planning that sought to avoid the rule by arranging for a tax debt to crystallize after the end of the year of the transfer, by arranging for the parties to deal at arm’s length at the time of the transfer, or by stripping net asset value through a series that does not breach the point-in-time valuation test, often combined with aggressive plans to eliminate the underlying liability. It proposed the rules now in subsection 160(5), a penalty for planners and promoters, and similar amendments to comparable provisions in other federal statutes, including section 325 of the Excise Tax Act. The Department’s November 2022 explanatory notes (clauses 38 and 39) describe the enacted rules.

The 2024 federal budget proposed a supplementary rule for plans in which a tax debtor transfers property to one person and, in the same transaction or series, a person other than the tax debtor makes a separate transfer to a person not dealing at arm’s length with the tax debtor, an extension of the section 160.01 penalty to that planning, and liability for the full avoided tax debt, including the portion retained by a planner as a fee. The budget observed that the courts had held participants not liable for the planner’s share, even where it had been moved offshore, a description that corresponds to the outcome in Microbjo (paras. 76 and 92–96). These proposals are the pending amendments described under “Legislative history” (Department of Finance, explanatory notes of May 2026, clause 55).

Scholarly and professional commentary to be added

← Interpretation and applicationRelevant case law →

Relevant case law

• Canada v. Heavyside (1996), 206 N.R. 206, 97 D.T.C. 5026 (F.C.A.). The transferee’s liability arises at the moment of the transfer, may be assessed at any time, and survives the transferor’s bankruptcy and discharge (reasons delivered from the bench; the Court’s copy is unnumbered).
• Gaucher v. Canada (2000), 264 N.R. 369, [2001] 1 C.T.C. 125 (F.C.A.). A person assessed under subsection 160(1) is a taxpayer with a full right of defence and may challenge the primary assessment, including on the ground that it was statute-barred, although it was confirmed in litigation to which the transferee was not a party (paras. 6–11 and 13).
• Wannan v. Canada, 2003 FCA 423. Section 160 is draconian and has no due diligence defence (para. 3); Heavyside affirmed (paras. 12 and 22); the transferee may challenge the primary assessment (para. 20); the Crown may apply a bankruptcy dividend to the transferor’s most recent liabilities (paras. 29–36).
• Canada v. Addison & Leyen Ltd., 2007 SCC 33, [2007] 2 S.C.R. 793. Section 160 contains no limitation period; delay before assessment does not ground judicial review, and challenges belong in the Tax Court (paras. 9–11).
• Canada v. Livingston, 2008 FCA 89 (leave to appeal refused, SCC 32630, 25 September 2008, as noted in Enns, para. 21). The four conditions (para. 17); deposits into another person’s bank account are transfers (paras. 21–22); consideration must be of equivalent value and moral obligation is not consideration (paras. 27–29).
• Canada v. 9101-2310 Québec Inc., 2013 FCA 241. Provincial private law governs whether ownership passes (para. 44); the Livingston rule does not apply in Quebec (paras. 53–54); the Minister may rely on a simulated transfer under article 1452 of the Civil Code of Québec (paras. 34–35 and 41); purpose and draconian character of the provision (para. 60).
• Canada v. 594710 British Columbia Ltd., 2018 FCA 166 (leave to appeal denied, SCC 38352, 21 February 2019, as noted in Eyeball, para. 17). A stock dividend followed by a redemption is a transfer without consideration (paras. 112–115); avoidance of section 160 is a tax benefit, and a deemed year end engineered between transfer and liability was abusive (paras. 109 and 120–126).
• Eyeball Networks Inc. v. Canada, 2021 FCA 17. The concept of a series is foreign to subsection 160(1); consideration is valued at the moment of transfer (paras. 46–53 and 58); valuation in the hands of the transferor and the transferee (paras. 67–68); payment of a bona fide debt is not caught (para. 63).
• 1455257 Ontario Inc. v. Canada, 2021 FCA 142. The transferee is liable for interest on the transferor’s liability up to the section 160 assessment (paras. 47–49); interest accrues on the section 160 assessment itself (para. 50); an unrequested loss carry-back cannot reduce the transferor’s liability (paras. 32–43).
• Jefferson v. Canada, 2022 FCA 81. To demolish an assumption of no consideration, the transferee must establish fair market value consideration, not merely some consideration; the Crown may rely on all the evidence (paras. 19–28).
• Canada v. Microbjo Properties Inc., 2023 FCA 157. Factual non-arm’s-length relationship between vendors and a promoter who divided the subsidiaries’ unpaid tax (paras. 60–90); liability limited to the monetary advantage derived, so the promoter’s share was not recoverable under section 160 or the general anti-avoidance rule (paras. 92–99).
• Enns v. Canada, 2025 FCA 14. A surviving spouse who receives the deceased’s registered retirement savings plan as designated beneficiary is not a “spouse” for paragraph 160(1)(a) (para. 60).
• Canada v. Csak, 2025 FCA 60. Gaucher applied to permit a statute-bar defence to the primary assessment; abuse of process not made out (paras. 11–23).
• Harvard Properties Inc. v. Canada, 2026 FCA 142. Section 160 and the general anti-avoidance rule did not apply to an arm’s-length vendor who gave fair market value consideration measured at the time of each transfer (paras. 54, 61–68, and 94–96); the transferee bears the burden of proving fair market value consideration (para. 78). Decided 27 August 2026. To be verified whether leave to appeal is sought.

Decisions of the Federal Court of Appeal are available on the Court’s website, and decisions of the Supreme Court on the Court’s website. Tax Court decisions will be added.

← Policy purpose and commentaryCRA documents →

CRA documents

• IC98-1R8, Tax Collections Policies, “Property transfer” (under “Special collections provisions”). A short summary of section 160 and its counterparts in section 325 of the Excise Tax Act, section 297 of the Excise Act, 2001, section 161 of the Greenhouse Gas Pollution Pricing Act, and section 96 of the Softwood Lumber Products Export Charge Act, 2006. It replaces IC98-1R7 (16 April 2017) and does not mention subsection 160(5).
• How we may make another person or entity also responsible for your debt, CRA collections page, under “non-arm’s-length transfers”. It states that the assessment will include only debt incurred up to and including the date of the transfer. The statutory measure is the transferor’s liability in or in respect of the year of the transfer or earlier years, together with interest to the date of assessment (1455257 Ontario, paras. 47–49), and the page should not be relied on for the quantum.
• Income Tax Folio S1-F5-C1, Related Persons and Dealing at Arm’s Length, ¶1.35 (property acquired under a will) and ¶1.37–1.40 (arm’s length as a question of fact).
• IT-511R, Interspousal and Certain Other Transfers and Loans of Property (21 February 1994, archived), para. 37, on paragraph 160(1)(d) and subsection 160(4).
• CRA technical interpretations are not published on canada.ca, and none is cited here.

← Relevant case lawRegulations, forms, and elections →

Regulations, forms, and elections

• Section 160 contains no regulation-making power, refers to no prescribed form, and provides no election to avoid liability under subsection 160(1).
• Form T400A, Notice of Objection – Income Tax Act, for an objection to a section 160 assessment.
• Form T1032, Joint Election to Split Pension Income, the election under section 60.03 on which the joint liability in subsection 160(1.3) depends.
• The joint elections under paragraphs 84.1(2.31)(h) and (2.32)(i), 110.61(1)(e), and 110.62(1)(e), on which subsections 160(1.5), (1.6), and (1.7) depend. Forms to be verified

← CRA documentsCompliance →

Compliance

• No filing by the transferee. The transferee files nothing. Liability arises by operation of law on the transfer and is enforced by assessment (subsection 160(2)).
• No limitation period. The Minister may assess at any time (Addison & Leyen, paras. 9–10), so exposure continues for as long as the transferor’s liability for the year of the transfer or earlier years remains unpaid.
• Interest. The assessed amount includes interest on the transferor’s liability up to the date of the section 160 assessment, and interest then runs on the transferee’s own assessment (1455257 Ontario, paras. 47–50).
• Objection and appeal. An objection may be served within 90 days after the day the notice of assessment is sent (paragraph 165(1)(b)). Paragraph 165(1)(a), which gives some individuals a longer period, applies to an assessment “for a taxation year”, and it is prudent to treat the 90-day period as governing a section 160 assessment. An appeal lies to the Tax Court once the Minister has confirmed the assessment or reassessed, or once 90 days have elapsed after service of the objection, on the conditions in paragraph 169(1)(b) (subsection 169(1)).
• Collection restrictions. The collection actions listed in subsection 225.1(1) may not be taken until the collection-commencement day, generally 90 days after the notice of assessment is sent (paragraph 225.1(1.1)(c)), nor while an objection is pending and for 90 days after the Minister confirms or varies the assessment (subsection 225.1(2)), nor while an appeal to the Tax Court is pending (subsection 225.1(3)).
• Penalty for planners. Section 160.01 applies to section 160 avoidance planning in transactions or series occurring, all or in part, after 18 April 2021.

← Regulations, forms, and electionsPlanning and dispute notes →

Planning and dispute notes

Planning

• Before any transfer to a spouse, common-law partner, minor, related person, or other person who may not deal at arm’s length in fact, establish the transferor’s position for the current year and earlier years, including exposure to reassessment. The current year’s liability counts even though it has not yet been assessed (594710 British Columbia, para. 120), and paragraph 160(5)(b) can bring a future liability into the year of the transfer.
• Document the fair market value of the property and of the consideration as at the moment of the transfer, preferably by an independent valuation or a contemporaneous third-party price (Eyeball, paras. 52–53 and 58; Harvard Properties, para. 45). The transferee will bear the burden of proving fair market value consideration (Jefferson, paras. 19–25).
• Consideration must be given by the transferee and have value in the transferee’s hands. Dividends, including stock dividends that are redeemed, are transfers without consideration (594710 British Columbia, paras. 112–115), and services rendered out of moral obligation are not consideration (Livingston, para. 29).
• For a transfer made as part of a series on or after 19 April 2021, paragraph 160(5)(c) looks to the lowest value of the consideration held by the transferor during the series. A later redemption, set-off, or cancellation of a note taken as consideration can create liability that would not have arisen under the snapshot rule in Eyeball.
• On a separation, make the transfer under a court order, judgment, or written separation agreement while the parties are living apart because of the breakdown, so that subsection 160(4) applies.
• On death, Enns removes a designated-beneficiary registered retirement savings plan passing to the surviving spouse from paragraph 160(1)(a). It does not address property passing through the estate, and the CRA regards a beneficiary who acquires property under a will as not dealing at arm’s length (Folio S1-F5-C1, ¶1.35); estate distributions by an indebted estate should be analysed separately.
• Transactions in which a planner or promoter takes a share of a tax liability should be declined. Section 160.01 applies to the planner, the pending subsections 160(6) to (8) would apply from 16 April 2024, and the factual non-arm’s-length analysis in Microbjo may apply to participants in any event.

Disputes

• Identify the version of section 160 that governs the transfer: subsection 160(5) applies from 19 April 2021, and the pending subsections (6) to (8), if enacted, from 16 April 2024.
• Examine the primary assessment. The transferee may raise any defence open to the transferor, including limitation (Gaucher, paras. 6–9; Csak, paras. 11–23), but may not rely on discretionary claims the transferor never made (1455257 Ontario, paras. 32–43), and has no greater rights than the transferor (594710 British Columbia, para. 95).
• Plead and prove fair market value consideration, not merely some consideration; the Crown may rely on the transferee’s own evidence and on cross-examination (Jefferson, paras. 19–28). Value the property in the transferor’s hands and the consideration in the transferee’s hands at the time of the transfer (Eyeball, paras. 67–68).
• Where the parties are unrelated, the arm’s-length question is one of fact on all the circumstances; price anomalies and the sharing of unpaid tax point to a non-arm’s-length relationship (Microbjo, paras. 61 and 81–90), and their absence points the other way (Harvard Properties, paras. 47–54).
• Delay in assessing is not in itself a defence and does not ground judicial review; the remedy is an objection and an appeal to the Tax Court, with mandamus possibly available to compel a decision on an outstanding objection (Addison & Leyen, paras. 10–11).
• Check the transferor’s account for payments and how they were applied, because a payment by the transferor reduces the transferee’s liability only as provided in subsection 160(3), and the Crown may apply undirected payments to the most recent liabilities (Wannan, paras. 29–36).
• In Quebec, whether a transfer occurred is determined under the Civil Code of Québec, and the Livingston rule does not apply (9101-2310 Québec, paras. 53–55); simulation may still expose the apparent transferee (para. 41).

← ComplianceProvincial and treaty parallels →

Provincial and treaty parallels

• Ontario. Section 138 of the Taxation Act, 2007, S.O. 2007, c. 11, Sch. A, applies sections 160, 160.2, 160.3, and 160.4 of the federal Act for Ontario purposes, except the federal assessment subsections (subsection 138(2)). The Ontario Minister may assess an amount payable under section 138 at any time (clause 140(1)(a)). No objection or appeal may be taken under the Ontario Act on an issue that is, or could have been, the subject of an objection or appeal under the federal Act (subsection 140(4)), and the Ontario Minister must reassess for consistency where the federal Minister reassesses under subsection 160(2) (subsection 140(5)).
• Quebec. Sections 14.4 to 14.7.1 of the Tax Administration Act, CQLR c. A-6.002, contain a parallel rule. It extends to amounts payable under any fiscal law (section 14.4), and a payment by the transferor reduces the transferee’s liability only if it brings the transferor’s liabilities below the amount for which the transferee is liable (section 14.6). Unlike subsection 160(2), section 14.5 limits the assessment to four years after the day on which the Minister becomes aware of the transfer, unless the transferee made a false representation of the facts through voluntary omission or committed fraud, or filed a waiver. Section 14.7 deems the value of property transferred on the breakdown of a marriage to be zero, and section 14.7.1 (S.Q. 2024, c. 41, s. 2) adopts anti-avoidance rules corresponding to subsection 160(5).
• GST/HST. Section 325 of the Excise Tax Act imposes a parallel liability for amounts payable or remittable under Part IX, with an assessment at any time (subsection 325(2)), a separation rule (subsection 325(4)), and anti-avoidance rules (subsection 325(5), added by S.C. 2022, c. 19, s. 64). The measure of liability in paragraph 325(1)(d) is reduced by any amount assessed under subsection 160(2) of the Income Tax Act in respect of the same property, net of the transferor’s payments on that amount, which coordinates the two liabilities where the same property is involved. Paragraph 325(5)(a) deems the parties not to deal at arm’s length at the time of the transfer, rather than at all times in the series.
• Tax treaties. Section 160 is a domestic collection measure. Where the transferee or the transferred property is outside Canada, recovery may depend on assistance-in-collection provisions in a relevant treaty, a subject IC98-1R8 addresses under “Tax treaties – Assistance in collection”. Treaty articles to be verified

← Planning and dispute notesAnnotated cross-references →

Annotated cross-references

• Section 160.01: penalty for section 160 avoidance planning, and the definitions (“section 160 avoidance transaction”, “tax attribute transaction”, and others) on which the pending subsection 160(8) would rely.
• Sections 160.1 (excess refunds), 160.2 (joint liability for amounts received out of or under an RRSP), 160.21 (registered disability savings plans), 160.3 (amounts received out of or under an RCA trust), and 160.4 (transfers by insolvent corporations): other derivative liabilities; subsection 160(3.1) applies to section 160.4.
• Section 251: related persons and the factual arm’s-length test in paragraph 251(1)(c).
• Subsection 248(1): definition of “property”, which includes money and rights of any kind.
• Sections 74.1 to 75.1: the attribution rules underlying paragraph 160(1)(d).
• Section 152, section 165, and section 169: assessment, objection, and appeal provisions applied by subsection 160(2).
• Section 225.1: collection restrictions after a section 160 assessment.
• Section 245: the general anti-avoidance rule, applied to the avoidance of section 160 liability.
• Subsections 69(11), 84.1(2.31) and (2.32), 104(13.4), and 120.4(2), and sections 60.03, 94, 110.61, and 110.62: the provisions whose operation triggers the joint liability rules in subsections 160(1.1) to (1.7) and (2.1).
• Section 227.1: directors’ liability, another derivative liability addressed in IC98-1R8 (“Directors’ liability”).

← Provincial and treaty parallelsSources →

Sources

• Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.), s. 160 and prior versions (point-in-time versions from 31 August 2004): Justice Laws Website; ss. 160.01, 165, 169, and 225.1 on the same site; amendments not in force: Justice Laws.
• Amending Acts on Justice Laws: S.C. 2022, c. 19, s. 38; S.C. 2024, c. 15, s. 50; S.C. 2024, c. 17, s. 80; S.C. 2026, c. 3, s. 75; 2026 Annual Statutes.
• Department of Finance Canada, Explanatory Notes Relating to the Income Tax Act and Other Legislation (November 2022), clauses 38 and 39.
• Department of Finance Canada, Notice of Ways and Means Motion to introduce a bill entitled A second Act to implement certain provisions of the budget tabled in Parliament on November 4, 2025 (May 2026), clause 55, and Explanatory Notes Relating to the Income Tax Act and Other Legislation (May 2026), clause 55.
• Budget 2021, Annex 6, Tax Measures: Supplementary Information, “Avoidance of Tax Debts” (archived); Budget 2024, Tax Measures: Supplementary Information, “Avoidance of Tax Debts” (archived).
• Federal Court of Appeal: Heavyside, Gaucher, Wannan, Livingston, 9101-2310 Québec, 594710 British Columbia, Eyeball, 1455257 Ontario, Jefferson, Microbjo, Enns, Csak, Harvard Properties.
• Supreme Court of Canada: Addison & Leyen.
• Canada Revenue Agency: IC98-1R8, the collections page on co-liability, Income Tax Folio S1-F5-C1, IT-511R, and Forms T400A and T1032, as linked under “CRA documents” and “Regulations, forms, and elections”.
• Ontario e-Laws, Taxation Act, 2007, ss. 138 and 140; LégisQuébec, Tax Administration Act, ss. 14.4 to 14.7.1; Justice Laws, Excise Tax Act, s. 325.

← Annotated cross-references