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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.

Ballantyne v. The King

In Ballantyne, Mr. Ballantyne was a tax debtor who owed $29,936 in unpaid income taxes from 2007 through 2012.  At time when he owed these debts, he transferred nearly $500,000 to his wife to help her buy a home in her own name.  

The CRA assessed his wife under subsection 160(1) of the Income Tax Act (“ITA”), asserting that she was jointly liable for her husband’s tax debt because at the time the funds were transferred, Mr. Ballantyne had significant tax debts, and there was no visible consideration for those transfers.

At the TCC, Ms. Ballantyne admitted that her husband used his inheritance to fund the purchase of her house.  She argued that while she took legal title to the house, they had agreed she could reside in the house for life, with the house to pass to Mr. Ballantyne’s two sons upon her death.  No evidence was presented to show that Ms. Ballantyne provided any consideration for the funds.

Ms. Ballantyne also challenged the CRA’s computation of her husband’s tax debt.  Although Mr. Ballantyne appeared as a witness, his evidence failed to change anything.

Ultimately, the TCC upheld the CRA’s assessment, finding that the statutory requirements in ITA 160(1) were met because Mr. Ballantyne had transferred funds to his spouse for no consideration at a time when he owed tax debts.

Takeaways

The CRA's powers to collect income tax and GST debts are vast, and the fact that a taxpayer has laudable intentions (such as leaving an inheritance to his or her heirs) really plays no part in the CRA's calculus.  Tax debts cannot be avoided through gifts to related individuals, and a better alternative is to fight tax assessments where merited, and to take positive action to deal with tax liabilities before they arise!

On that front, the CRA has a newly revamped Voluntary Disclosure Program that can be used in many instances to try and bring some certainty to income tax and GST obligations.

Professional advice also often helps!

For help with CRA audits, debts & assessments, please click here.

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