Taxpayers PM and TM were son and daughter-in-law of NK, who was principal of tax debtor N Ltd.. Tax debtor did not object to three reassessments and did not pay tax owing. Tax debtor issued cheques to taxpayers without consideration. Minister of National Revenue assessed taxpayers pursuant to s. 160 of Income Tax Act. Taxpayers appealed. Appeals dismissed. Monies were transferred by tax debtor to taxpayers for no consideration. Taxpayers and tax debtor were not dealing at arm’s length. Tax debtor had tax debt owing at time of transfers. Minister did not establish that first two underlying reassessments were correct because Canada Revenue Agency (CRA) lost or destroyed documents relating to those years and taxpayers never had access to those tax records. Taxpayers had tax debtor’s income tax return for third year of reassessment so they had burden of establishing correctness of that reassessment. Minister correctly reassessed tax debtor for third year, in disallowing tax debtor’s small business deduction. Since tax debt of at least $70,000 in third year’s reassessment was higher than transfer of monies of $56,500, s. 160 of Act applied.
Monsell v. The Queen (2019), 2019 CarswellNat 233, 2019 TCC 5, Johanne D’Auray J. (T.C.C. [General Procedure]).