Section 160 joint liability for tax

Section 160 applies where a person transfers property, directly or indirectly, to their spouse or common-law partner, to a person under the age set in paragraph 160(1)(b), or to a person they were not dealing with at arm’s length. Under paragraph 160(1)(e) the transferee and transferor are jointly and severally, or solidarily, liable for the lesser of two amounts: the excess of the property’s fair market value over the fair market value of the consideration given, and the amounts the transferor is liable to pay under the Act for the transfer year or any preceding year. Subsection 160(2) lets the Minister assess at any time.

Where it appears in a deal

In a purchase, it can apply where buyer and seller are not dealing at arm’s length and the price is below fair market value. The CRA’s collections guidance describes the same pattern: a debt in the year of the transfer or earlier, a non-arm’s-length transfer, and a price below fair market value. It says the assessment is for the difference and includes only debt incurred up to the transfer date. See also whether the CRA can challenge a price allocation later.

What to ask

• Whether buyer and seller deal at arm’s length
• Whether the price matches fair market value, and what supports that
• Whether the seller owes tax, and whether subsection 160(4), on transfers between separated spouses or common-law partners under a court order or written separation agreement, applies