Tax & Trade Blog

---

LONG-ARM OF CRA COLLECTIONS

CRA FOLLOWS HUSBAND'S TAX DEBT TO WIFE

As we have blogged here and here, the CRA has “third-party” transfer powers that allow it to follow a taxpayer’s GST or income tax debts to relatives where it can demonstrate that money or assets have been diverted to those relatives, for less than fair market value. 

A better alternative would be dealing with one's tax debts during one's lifetime, and using the CRA’s newly revamped Voluntary Disclosure Program to help settle one’s tax affairs finally and effectively.

The Tax Court of Canada's (“TCC”) recent decision Ballantyne v. The King (2025 TCC 127) underscores the mess that can be created for a spouse or children if tax debts remain unaddressed.

As we have previously written here and here, a taxpayer’s debts can be imposed on their spouse or children through an assessment under section 160 of the Income Tax Act (“ITA”).  The Federal Court of Appeal has now drawn a line in the sand limiting the reach of such assessments with respect to the spouse of a tax debtor.

In Enns v. The King, 2025 FCA 14, the Court held that a survivor ceases to be the spouse of a deceased taxpayer for the purposes of section 160 of the ITA.  While the ruling is a win for survivors, it leaves open the question of how far the CRA’s assessment powers under section 160 may extend.