MOVING ASSETS IN TAX DISPUTE? THINK AGAIN!
WHY TRANSFERRING ASSETS CAN MAKE A BAD SITUATION WORSE
When a taxpayer is assessed by the Canada Revenue Agency (“CRA”), the instinct to “do something” can be overwhelming. One of the most common reactions is to start moving assets to related parties – for example to spouses or children – in the hopes of keeping them out of the CRA’s reach while the tax dispute plays out.
A recent Tax Court of Canada ("TCC") decision shows why this instinct is a bad idea, and is a lesson for anyone trying to sidestep tax problems: what one does after the fact can often make things worse for all involved!