Tax Court Reassesses Liability Based on Fair Market Value

Docket: 2015-5444(IT)G BETWEEN: [NAME_1], Appellant, and HIS [NAME_3] [NAME_3], Respondent ; Docket: 2015-5442(IT)G AND BETWEEN: [NAME_5], Appellant, and HIS [NAME_3] [NAME_3], Respondent. Motion by the Appellant [NAME_1] and motion by the Respondent both heard on September 8, 2025 at Vancouver, British Columbia. Appeals heard on common evidence on September 8, 9 and 10, 2025 at Vancouver, British Columbia. Before: The Honourable Justice Edward (Ted) Cook Appearances : For the Appellant [NAME_1]: The Appellant herself For the Appellant [NAME_5]: The Appellant himself Counsel for the Respondent: [redacted]

JUDGMENT In accordance with my oral reasons delivered from the [NAME_8], the motion by [NAME_1] for an adjournment of the hearing of her appeal is dismissed. In accordance with my oral reasons delivered from the [NAME_8], the motion by the Respondent for the dismissal of the appeal by [NAME_1] for delay is dismissed. In accordance with the attached reasons, the appeal by [NAME_1] of the assessment dated November 6, 2012 made under section 160 of the Income Tax Act is allowed and the assessment is referred back to the Minister of National Revenue for reconsideration and reassessment on the basis that: · the fair market value of the consideration provided by [NAME_1] for the transferred property was $85,000; and · the underlying tax liability of [NAME_9] is that decided by the judgment of this Court rendered March 10, 2015 for appeal 2012-3681(IT)G, and includes interest accruing to November 6, 2012 . In accordance with the attached reasons, the appeal by [NAME_5] of the assessment dated November 6, 2012 made under section 160 of the Income Tax Act is allowed and the assessment is referred back to the Minister of National Revenue for reconsideration and reassessment on the basis that the underlying tax liability of [NAME_9] is decided by the judgment of this Court rendered March 10, 2015 for appeal 2012-3681(IT)G, and includes interest accruing to November 6, 2012. Costs are awarded to the Respondent for the motion by [NAME_1]. Each party shall bear their own costs for the Respondent’s motion. Costs are awarded to the Respondent for the appeals by [NAME_1] and [NAME_5]. The parties have 30 days from the date of this judgment to agree on costs. If they do not, the Respondent will have a further 30 days to file a submission on costs. Each Appellant will then have 10 days to file a submission in response. A submission may not exceed 10 pages. If the parties do not agree on costs and the Respondent does not make a submission, the Respondent is awarded one set of costs in accordance with the Tariff. Signed on this 30th day of January 2026. “Ted Cook” Cook J. Citation : 2025 TCC 18 Date: 20260130 Docket: 2015-5444(IT)G BETWEEN: [NAME_1], Appellant, and HIS [NAME_3] [NAME_3], Respondent; Docket: 2015-5442(IT)G AND BETWEEN: [NAME_5], Appellant, and HIS [NAME_3] [NAME_3], Respondent.

REASONS FOR

JUDGMENT Cook J. Introduction [ 1 ] The [NAME_10], [NAME_1] and [NAME_5], appeal from assessments, dated November 6, 2012, made under section 160 of the Income Tax Act ( “Act” ). The underlying tax liability for the assessments is that of [NAME_9]. The appeals were heard on common evidence. [ 2 ] [NAME_9] was the sole registered owner of the [NAME_2], located in Surrey, British Columbia. On June 3, 2010, he transferred a 59% interest in the home to his wife, [NAME_1], and a 40% interest to his son, [NAME_4]. [NAME_9] retained a 1% interest. [ 3 ] At that time, [NAME_9] was engaged in a dispute with the Canada Revenue Agency ( “CRA” ) regarding his 2004 and 2005 taxation years. Those years had been reassessed in March 2009. The CRA calculated that on November 6, 2012 [NAME_9]’s outstanding tax liability under the Act (i.e., the total amount of tax, penalties and interest outstanding) in respect of those years was $1,065,099. [ 4 ] Subsection 160(1) of the Act provides that, if certain conditions are met, someone who has been transferred property may become jointly and severally, or solidarily, liable for all, or part of, the tax liability under the Act of the person who transferred the property to them. [NAME_1] was assessed $646,742, and [NAME_4] was assessed $438,469, on the basis that [NAME_9] had transferred interests in the family home to them while he had an income-tax liability and that each had given $1 in consideration for the transfer. [ 5 ] In March 2015, this Court rendered a judgment allowing [NAME_9]’s appeals for his 2004 and 2005 taxation years. Those years were subsequently reassessed. The amounts reassessed were less than those used to support the assessments of [NAME_1] and [NAME_4]. [ 6 ] In 2016, both [NAME_9] and [NAME_4] transferred their interests in the [NAME_2] to [NAME_1]. She became its sole registered owner . The [NAME_2] continues to live there. Issues [ 7 ] The issues for [NAME_1] and [NAME_4] differ even though they both acquired property in the same transaction. For [NAME_1], the issues are as follows: · Did she provide consideration for the transfer in 2010 of an interest in the family home to her? · If she did provide consideration, what was the fair market value of that consideration? [ 8 ] For [NAME_4] , the issues are as follows: · Was property transferred to him for the purposes of section 160 when he was transferred an interest in the family home in 2010? · Does it matter that he transferred his interest in the family home to [NAME_1] in 2016? [ 9 ] If [NAME_1] and [NAME_4] are liable under section 160, there is one additional issue: the impact, if any, of the March 2015 judgment and subsequent reassessment of [NAME_9]’s 2004 and 2005 taxation years. Analysis Overview [ 10 ] The rules in paragraph 160(1)(e) of the Act will apply in this instance if the following conditions are met: · A transferor transferred property, either directly or indirectly, by means of a trust or by any other means whatever, to a transferee. · The transfer was made to a person with whom the transferor was not dealing at arm’s length, whether by virtue of being the transferor’s spouse or otherwise. [ 11 ] As explained below, [NAME_9] transferred property to both [NAME_1] and [NAME_4] for the purposes of subsection 160(1) when they acquired interests in the [NAME_2] in June 2010. [NAME_9] was, and still is, [NAME_1] spouse. [NAME_9] did not deal at arm’s length with [NAME_4] because he is [NAME_4]’s father . [ 12 ] Since both conditions have been met, paragraph 160(1)(e) provides that, in this instance, each Appellant is jointly an d severally, or solidarily, liable with [NAME_9] for an amount equal to the lesser of · the total of all amounts [NAME_9] was liable to pay under the Act in respect of a taxation year preceding the transfer, and · the amount by which the fair market value of the transferred property exceeds the fair market value of the consideration given for the transferred property (both determined at the time of the transfer). [ 13 ] At the time of the transfer (i.e., June 3, 2010), [NAME_9] had a liability under the Act in respect of preceding taxation years (i.e., 2004 and 2005). The [NAME_10] did not challenge the underlying tax liability of [NAME_9], on which the section 160 assessments were based. [NAME_9]’s underlying tax liability is his income-tax liability, including accrued interest, for the 2004 and 2005 taxation years as finally determined by the March 2015 judgment (see [NAME_11] v The Queen , 2020 TCC 4 at para 39). [ 14 ] The onus was on the [NAME_10] to challenge the fair market value of the [NAME_2] determined by the CRA (see [NAME_12] v The Queen , 2011 TCC 380 at para 27). Although there were some passing comments in testimony that the fair market value of the home was lower than the fair market value used by the CRA, no credible attempt was made to challenge the CRA’s value. [ 15 ] I accept that the fair market value of the [NAME_2] at the time of the transfer was the amount determined by the CRA. That amount was $1,096,175, being $2,335,000 minus $1,238,824 of registered encumbrances. Consequently, the fair market value of the 59% interest transferred to [NAME_1] was $646,743 and the fair market value of the 40% interest transferred to [NAME_4] was $438,470. [ 16 ] For the reasons below, I find that [NAME_1] gave consideration of $85,000 for the interest in the [NAME_2] transferred to her and that [NAME_4] gave no consideration for the interest transferred to him. [NAME_1] [ 17 ] The land on which the [NAME_2] sits was purchased in 2004. An existing house was demolished and a new one built. [NAME_9] acted as construction manager for the project. The [NAME_2] was completed in 2008. [ 18 ] The land title document for the June 2010 transfer states that the transfer was made for “$1 and other good and valuable consideration.” At the time of the transfer, no consideration was paid by [NAME_1]. She argues that she paid significant funds to [NAME_9] to pay for the construction of the new home and that those funds constitute consideration paid by her for the transfer of a 59% interest in the family home to her. She also argues that the amount of those funds exceeds the fair market value of the property transferred to her. [ 19 ] More specifically, [NAME_1] testified that she acquired a property in Surrey, British Columbia ( “[NAME_13]” ) in September 2006 for $1,050,000. She was its sole registered owner. [NAME_13] was sold in August 2007 for $2,250,000. She said that the profit from the sale was hers and that she gave that profit to [NAME_9] for the construction of the [NAME_2]. She would give money to [NAME_9] and he would then pay the construction expenses. [ 20 ] Even though [NAME_1] was the sole registered owner of [NAME_13] and she testified that the profit from it was hers, the capital gain from its sale was split amongst the members of the [NAME_2] for income-tax purposes. [ 21 ] [NAME_1] said that over the years she repeatedly asked [NAME_9] to transfer the property to her. [NAME_9] finally relented and in June 2010 the transfer was made. [NAME_4] was also transferred an interest in the home so that his income could be used for mortgage-financing purposes. [NAME_1] said that she knew nothing of [NAME_9]’s tax issues and that the transfer was not made to avoid his tax liability. [ 22 ] Section 160 can apply to a transferee who has no intention to assist a tax debtor to avoid their tax liability (see [NAME_14] v The Queen , 2003 FCA 423 at para 3). A tax or other motive might assist, however, in explaining why a transfer to a non-arm’s length party would take place without consideration. [NAME_9] was dealing with several issues at the relevant time, including issues with the Canadian Radio-television and Telecommunications Commission (or CRTC), and income tax and GST issues. Even if [NAME_1] was unaware of these issues, they still cast doubt over the reason for the transfer and, consequently, whether the transfer was made for consideration. [ 23 ] [NAME_9] testified that the [NAME_2] was [NAME_1] from the start and that he purchased it on her behalf. He was the purchaser because he had a relationship with the seller. It was put in his name for mortgage-financing purposes and he remained sole legal owner until 2010 for new-home-warranty purposes. [NAME_1] owned the [NAME_2] while [NAME_9] owned a corporation that operated a radio station ( “[NAME_15]” ) and, through [NAME_15], two strata units. [ 24 ] I find [NAME_1] did not provide any consideration for her interest in the family home other than $85,000 conceded by the Respondent. It is the total of three amounts evidenced by receipts and directly paid by [NAME_1]. All other invoices and receipts were directed to [NAME_9]. [ 25 ] It is accepted that consideration can flow between spouses. The consideration, however, must be given for the transfer of property (see [NAME_16] v The Queen , 2010 TCC 276 at para 26). In [NAME_17] v The Queen , 2009 FCA 50, the Federal Court of Appeal rejected the notion that consideration for section 160 could include family support obligations or use of the matrimonial home. Additionally, contributions to family finances do not constitute consideration for the purposes of section 160. [NAME_1] testified that family members pooled their money to pay bills and make mortgage payments. Such use of funds is not consideration. [ 26 ] In [NAME_18] v The Queen, 2017 TCC 175, the Court found consideration for a transfer of property based on a verbal agreement between spouses. In that case, there was credible testimony regarding the agreement and identifiable payments were made before the transfer took place. There is no such evidence here. [ 27 ] [NAME_1] was not a credible or reliable witness. She testified that she had significant funds from the sale of [NAME_13] and that she paid them to [NAME_9] for the construction of the [NAME_2] . In all other material aspects, her testimony was vague and incomplete. Her recollection of relevant events was poor and at times she was evasive. [NAME_9]’s testimony was similarly problematic. Their testimonies were also inconsistent (e.g., in relation to how family finances were managed). [ 28 ] [NAME_1] nor [NAME_9] testified with any specificity regarding any agreement between them, or [NAME_1] payments to [NAME_9] for the [NAME_2]. [NAME_1] could not remember how much money she gave [NAME_9] for the family home, whether she gave him a lump sum or instalments, or when she did so. [NAME_1] and [NAME_9] said they could not remember specifics of the relevant events because of how long ago they occurred. [ 29 ] [NAME_1] did not adduce any documentary evidence in support of her case. There were no agreements or receipts that support her ownership of the [NAME_2] or her giving funds to [NAME_9] for the construction of the home other than the $85,000 conceded by the Respondent. [ 30 ] [NAME_1] testimony and the documentary evidence adduced by the Respondent showed that significant funds circulated between [NAME_1], [NAME_9], [NAME_15] and third parties. The purposes of these transfers were undocumented and often unclear. [ 31 ] For example, a law firm transferred $400,000 to [NAME_1] on August 29, 2006. She said that it was a short-term loan from a friend to her and [NAME_9], and that due to the large amount involved it was paid through a law firm so as to provide a record. Yet there was no loan agreement and the friend was not identified. [NAME_9] could not recall who had lent the money. [ 32 ] [NAME_1] advanced significant funds in respect of [NAME_15]. In particular, [NAME_1] transferred $375,000 to [NAME_15] on January 30, 2007 to allow it to meet its license-lease obligations. [NAME_1] did not keep track of these advanced funds or their repayment by [NAME_9]. [ 33 ] Consequently, it is not possible to identify any specific amounts, other than those conceded by the Respondent, paid by [NAME_1] as consideration for the [NAME_2]. [ 34 ] [ADDRESS] heard several times that all documents had been provided to either the CRA or the [NAME_10]’ lawyers, and that the documents had been lost. There was no evidence, other than the testimony of [NAME_1] and [NAME_9], to support the contention that the CRA or their lawyers had somehow mishandled the [NAME_10]’ documents. [ 35 ] To the extent that the passage of time caused genuine issues with respect to recollection and documents, [NAME_1] is the author of her own misfortune. She dragged her heels on these appeals, changing lawyers at least five times and seeking numerous adjournments. [ 36 ] In the end, the Court is left with the unsupported assertion that the profit from the sale of [NAME_13] was [NAME_1] and she used that profit to pay for the construction of the [NAME_2]. As noted by the Court in [NAME_19] v The Queen , 2003 TCC 464 at paras 66 and 67, vague and general statements are not enough to meet the burden of proof on an appellant. A transfer of property between spouses can be done for many valid and legitimate reasons, but it can also be done to the detriment of creditors, so it is important for an appellant to submit solid evidence. See also [NAME_20] v [NAME_3] , 2024 TCC 14. [ 37 ] Given the lack of credible testimony and supporting documentary evidence, [NAME_1] has been unable to meet her burden of proof. I find that the only consideration she provided for the transfer to her of an interest in the [NAME_2] was the $85,000 conceded by the Respondent. [NAME_5] [ 38 ] [NAME_4]’s situation is more straight forward. I find him to be a credible witness, but his recollection of the relevant events was limited. He was 19 or 20 years old at the time of the 2010 transfer. He was told to sign the documents for the home transfer to assist the family with mortgage financing. Adding his name to the title would add his income to the relevant mortgage calculations. He did not pay anything for the transfer and, as far as he was concerned, he did not get anything. [ 39 ] [NAME_4] was unaware of any financial issues, tax or otherwise, his father might have had at the time. [NAME_4] did not recognize either the section 160 assessment notice or the confirmation notice. He was unaware of the assessment until he attempted to get a loan for supplies at a lumberyard and learned about CRA collection actions. This soured his relationship with his father. At [NAME_4]’s behest, [NAME_4]’s interest in the home was transferred to [NAME_1] in 2016. He did not receive any consideration for the transfer to [NAME_1]. [ 40 ] I am prepared to accept that when [NAME_4] was transferred a legal interest in the family home, he did not acquire any beneficial interest in it. Is this enough to prevent the application of subsection 160(1)? Unfortunately for [NAME_4], it is not. [ 41 ] In [NAME_21] v The Queen , 2008 FCA 89, the Federal Court of Appeal held that a transfer of legal title is sufficient to engage subsection 160(1) because the provision applies to a transfer of property “by means of a trust or by any other means whatever” . This interpretation supports the purposes of the subsection described in [NAME_21] at para 22: “… which, after all, is designed, inter alia , to prevent the transferor from hiding his or her assets, including behind the veil of a trust, in order to prevent the CRA from attaching the asset.” [ 42 ] Does it make a difference that [NAME_4] disposed of his interest in the [NAME_2] in 2016 to [NAME_1]? Not directly. Disposing of his interest in the family home does not relieve [NAME_4] of his liability under subsection 160(1). A section 160 assessment is not extinguished by a further transfer of the relevant property ( [NAME_22] v The Queen , 2007 TCC 268 at paras 44 and 45). The transfer of his interest in the [NAME_2] to [NAME_1] does, however, potentially open her to another section 160 assessment: see subparagraph 160(1)(ii) of the Act. Reassessment of [NAME_9] [ 43 ] The relevant underlying tax liability is [NAME_9]’s income-tax liability, including penalties and interest. By judgment dated March 10, 2015, this Court allowed [NAME_9]’s appeals from the reassessments of the 2004 and 2005 taxation years. The reassessments were referred back to the Minister of National Revenue ( “Minister” ) for reconsideration and reassessment in accordance with the terms of the parties’ amended consent to judgment. The Minister subsequently reassessed [NAME_9] in April 2015. [ 44 ] As a consequence, the underlying tax liability used in the November 6, 2012 assessments is not the correct underlying tax liability. The correct underlying tax liability is based on the March 2015 judgment of this Court, comprising [NAME_9]’s tax, penalties and interest accruing until November 6, 2012 (i.e., the date of the section 160 assessments). See 1455257 [COMPANY_23]. v Canada , 2021 FCA 142 at para 49 and the interpretation of “balance-due day” in the context of section 160 by Justice Spiro in [NAME_24] v [NAME_3] , 2025 TCC 184. [ 45 ] I do not know whether this is just a theoretical issue. [ADDRESS] was not provided with calculations recasting [NAME_9]’s tax debt as at November 6, 2012. Therefore, I will allow both appeals to ensure that the [NAME_10] are reassessed using the correct underlying tax liability. Conclusion [ 46 ] [NAME_1] appeal is allowed and the assessment is referred back to the Minister for reconsideration and reassessment on the basis that (i) the fair market value of the consideration provided by [NAME_1] was $85,000, and (ii) the underlying tax liability of [NAME_9] is that decided by the judgment of this Court rendered March 10, 2015, and includes interest accruing to November 6, 2012 . [ 47 ] [NAME_4]’s appeal is allowed and the assessment is referred back to the Minister for reconsideration and reassessment on the basis that the underlying tax liability of [NAME_9] is that decided by the judgment of this Court rendered March 10, 2015, and includes interest accruing to November 6, 2012. [ 48 ] Costs are awarded to the Respondent for both appeals. Costs are also awarded to the Respondent for [NAME_1] motion for an adjournment of the hearing of her appeal, which I dealt with as a preliminary matter. Each party shall bear their own costs for the Respondent’s motion for the dismissal of [NAME_1] appeal for delay, which I also dealt with as a preliminary matter. [ 49 ] The parties have 30 days from the date of this judgment to agree on costs. If they do not, the Respondent will have a further 30 days to file a submission on costs. Each Appellant will then have 10 days to file a submission in response. A submission may not exceed 10 pages. If the parties do not agree on costs and the Respondent does not make a submission, the Respondent is awarded one set of costs in accordance with the Tariff. Signed on this 30th day of January 2026. “Ted Cook” Cook J. CITATION: 2026 TCC 18 COURT FILE NO.: 2015-5444(IT)G STYLE OF CAUSE: [NAME_1] AND HIS [NAME_3] [NAME_3] NO.: 2015-5442(IT)G STYLE OF CAUSE: [NAME_5] AND HIS [NAME_3] [NAME_3] OF HEARING: Vancouver, B.C. DATE OF

JUDGMENT: January 30, 2026 APPEARANCES: For the Appellant [NAME_1]: The Appellant herself For the Appellant [NAME_5]: The Appellant himself For the Respondent: [redacted] COUNSEL OF RECORD: For the [NAME_10]: For the Respondent: [redacted]