Canada: No Interest On A Section 160 Assessment

Last Updated: December 20 2001
Article by David Malach

First Appeard In Fall 2001 TaxLine:Tax Litigation Briefings.

Section 160 of the Income Tax Act (Canada) (the "Act") provides that where a person has transferred property to a spouse, minor or non-arm’s length person, the transferee will be jointly and severally liable for tax that the transferor was liable to pay at the time of transfer, subject to certain limits. There is no time limit in which the CCRA must assess a taxpayer under section 160 of the Act.

In Algoa Trust v. The Queen,98 D.T.C. 1614, the Tax Court of Canada held that interest could not be charged on an assessment issued under section 160. In Algoa,the corporate taxpayer paid a cash dividend to one shareholder and a stock dividend to the other. At the time the dividends were paid, the company had satisfied all of its tax liabilities. The corporation was subsequently reassessed for additional taxes for the taxation year in which the transfer was made.

The Tax Court held that the payment of dividends was a transfer of property without consideration and that section 160 applied. (However, it is interesting to note that in a recent case, Gestion Yvan Drouin v. The Queen, 2001 DTC 72, the Tax Court of Canada found that the payment of dividends was not a transfer of property without consideration within the meaning of section 160 of the Act.)

Shortly after the decision of the Tax Court in Algoa, the CCRA began collection of the debt owing by the taxpayer. For the period from the date of the section 160 assessment to the date of the Tax Court of Canada’s judgment, interest had been accruing. The taxpayer appealed to the Tax Court of Canada with respect to the accrued interest.

The Tax Court held that section 160 did not create a new tax debt. Accordingly, interest does not accrue on a section 160 assessment, since there is no specific charging provision in the Act providing for interest accruing on a section 160 assessment.

The decision in Algoa was not appealed by the CCRA. However, the CCRA is not accepting that interest is not payable on a section 160 assessment. The CCRA is continuing to assess interest on a section 160 assessment. We have recently had one tax appeal relating to interest assessed under a section 160 assessment allowed based on Algoa.

The case of Ho-A-Shoo v. Attorney General of Canada, 2000 D.T.C. 6293, involves a class action proceeding under the Ontario legislation whereby a representative taxpayer is claiming recovery of interest paid following a successful section 160 assessment on the basis of unjust enrichment. In this case, the taxpayer received gifts from a corporation controlled by her father. The CCRA issued four assessments against the taxpayer under section 160 of the Act. Following a negotiated settlement, the CCRA issued two new reassessments to implement the consent to judgment together with interest.

The payment of unassessed interest accruing after the consent to judgment was also requested. The taxpayer paid all amounts of assessed and unassessed interest as requested. She later instituted a class action proceeding in the Ontario Superior Court of Justice for the recovery of the unassessed interest, alleging that it had been paid under compulsion and by mistake. The CCRA brought a motion seeking to have the taxpayer’s action dismissed, alleging that it was an abuse of process or that the court was without jurisdiction to hear it.

The Ontario Superior Court of Justice denied the minister’s motion to have the action dismissed, finding that it had jurisdiction to hear the issue. The Ontario Superior Court found that there were several procedural advantages to the Ontario Superior Court of Justice retaining jurisdiction in this case, given that it was in the nature of a class proceeding. The CCRA’s motion to dismiss the action was denied. The merits to the class action proceeding in Ho-A-Shoo will be heard by the Ontario Superior Court.

The court’s decision in Algoa is undoubtedly an important one since thousands of taxpayers could be affected. If the taxpayer in Ho-A-Shoo succeeds, taxpayers who have been previously assessed under section 160 and who have paid interest could potentially recover the interest paid: taxpayers who have paid interest on a section 160 assessment should contact their tax advisers

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions