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Federal Tax - Collection - Arm's Length. Pillon v. Canada
In Pillon v. Canada (Fed CA, 2023) the Federal Court of Appeal considered the tax collection provision of ITA s.160 ['Tax liability re property transferred not at arm’s length'], here respecting non-arm's length transactions where the transferee may be liable for the transferror's tax liability (akin to fraudulent conveyance):[2] By way of background, s. 160(1) is a tax collection measure. It concerns a situation in which a person with an outstanding tax liability transfers property to another person without receiving adequate consideration. If they were not dealing at arm’s length, the person who received the property, the transferee, is liable for the transferor’s outstanding tax liability up to the net amount received.
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[8] To determine the non-arm’s length issue, the trial judge applied the legal principles articulated by the Supreme Court of Canada in Canada v. McLarty, 2008 SCC 79. She found that Ms. Pillon and Mr. Wall were not dealing at arm’s length because they acted in concert without separate interests. In making this finding, the Court noted that Ms. Pillon or Mr. Wall had signed various documents which indicated that they were: “partners, common law, husband and wife, reflected a common address, and had also a financial relationship between them.” The trial judge concluded that they had a close personal relationship.
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