29 March 2010 Internal T.I. 2010-0357191I7 - The Reassment Period for a Section 160 Assment

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Principal Issues: Whether reassessments of a section 160 assessment are statute-barred, if raised beyond 3 years of the original assessment.

Position: Yes.

Reasons: Subsection 160(2) is the authority to issue a subsection 160(1) assessment. When issued, such an assessment is treated as a section 152 assessment. Accordingly, subsection 152(4) applies.

							March 29, 2010

							HEADQUARTERS
	Vancouver Tax Services Office		Income Tax Rulings
							  Directorate
							Lindsay Frank
	Attention: Bob Smith			(613) 948-2227
	           Chief of Appeals
							2010-035719

The Reassessment Period for a Section 160 Assessment

This is reply to an email from Gilbert Lee. At issue, is whether a reassessment under section 160 of the Income Tax Act (the "Act") is governed by the limitations described in section 152 of the Act.

Mr. Lee is reviewing a file where a section 160 assessment was raised in December 1993, and reassessments in respect of the same transfer were issued in April and June of 1997. The position being taken is that, as the reassessments were raised beyond 3 years of the original assessment, they are statute-barred by virtue of subsections 153(3.1) and (4) of the Act. Confirmation of this position is requested.

Under subsection 160(1) of the Act, a transferee, in receipt of property from a transferor with whom there is no arm's length relationship, is jointly and severally liable with the transferor for that person's tax liability at the time of the transfer. The liability is equal to the lesser of the fair market value of the property transferred less the consideration paid, and the transferor's tax liability. Subsection 160(2) is the authority to issue that assessment, and provides that such an assessment may be raised at any time. Subsection 160(2) also provides that once the assessment has been raised, it is treated as though it were raised under section 152.

Section 152 empowers the Minister to assess, reassess, and make an additional assessment of tax, interest, penalties, and determinations. Section 152 also sets out time limitations on assessments, reassessments, and additional assessments. For individuals and Canadian-controlled private corporations, subsection 152(3.1) defines the normal reassessment period as the period that ends three years after the earlier of the date of the mailing of the notice of assessment and the mailing of an original notification that no tax is payable. However, subsection 152(4) gives the Minister the authority to assess, reassess, or make an additional assessment at any time, or to notify in writing any person by whom a return of income for a taxation year has been filed that no tax is payable for the taxation year.

The courts have defined the meaning of the words "at any time" in subsection 160(2). In Davis v. R., [1994] 2 C.T.C. 2033 (T.C.C.), it was held that the words meant that the reassessment period does not start running with the transfer of property. In Payette v. M.N.R., [1979] C.T.C. 2052 (T.R.B.), Dupuis v. M.N.R., [1993] 2 C.T.C. 2032 (T.C.C.), Sarraf v. R., [1994] 1 C.T.C. 2519 (T.C.C.), and Bleau v. R., [2008] 1 C.T.C. 2178 (T.C.C.) aff'd in 2008 D.T.C. 6516 (F.C.A.), the words were held to mean that the three-year reassessment period does not start with the assessment of the transferor's tax liability.

In the 35th edition of The Practitioner's Income Tax Act, David Sherman notes at page 1211 that "... once an assessment has been issued under 160(2) in respect of a given transfer of property, the reassessment period under 152(4) begins to run in respect of any later assessment based on the same transfer of property, since 'the provisions of this Division' apply. The CCRA conceded this point to the author in 1998, at the objection stage of a file."

Accordingly, once a section 160 assessment has been raised, given that subsection 160(2) treats it as though it were raised under section 152, subsection 152(4) applies. As a result, the facts in the instant case indicate that the reassessments are out of time and accordingly must be vacated. However, the original assessment is still valid.

Should you need clarification or further information, please do not hesitate to contact Lindsay Frank at the number above.

B.J. Skulski
Manager
Insolvency and Administrative Law Section
Ontario Corporate Tax Division
Income Tax Rulings Directorate

c.c. Gilbert Lee
Appeals Division
Vancouver Tax Services Office