Section 160 of the Income Tax Act is one of the most far-reaching collection tools the Canada Revenue Agency (CRA) has. It allows the CRA to step around a tax debtor and pursue a third party — very often a spouse — who received property for less than fair market value while the debtor owed tax. Because the rule offers no due-diligence defence and no limitation period, the person assessed is frequently a spouse who simply had a half-interest in the family home moved into their name years earlier, with no idea a tax debt even existed.
The Tax Court of Canada’s decision in Vasilkioti v The King, 2024 TCC 101 matters because it shows that section 160, for all its harshness, is not automatic. The CRA still has to prove its case — including that the transferor actually owed the underlying tax — and where it relies on unreliable internal records rather than the real assessments, the assessment can fail. The Court vacated a derivative assessment of roughly $72,000 against a wife who had received her husband’s half-interest in the matrimonial home.
The facts
The taxpayer, Ms. Vasilkioti, and her husband purchased a home in the Toronto area together in 2008, each holding a 50% interest. In July 2012, the husband transferred his 50% interest in the property to his wife. The CRA later assessed the husband for tax it said he owed for several earlier taxation years, and then issued a derivative assessment against Ms. Vasilkioti in 2019 under section 160 — on the theory that she had received valuable property from a tax debtor for little or no consideration.
The arithmetic of section 160 is unforgiving. The transferee’s liability is capped at the value of the benefit received: the fair market value of the property transferred, minus whatever the transferee actually gave for it. Here, the CRA pegged that benefit, and therefore Ms. Vasilkioti’s exposure, at roughly $72,000 — an amount tied to the husband’s alleged tax debt at the time of the transfer.
The problem, as the case unfolded, was the evidence the CRA brought to prove that the husband owed tax in the first place. Rather than producing the husband’s actual filed returns and notices of assessment, the Crown relied on internal CRA computer printouts. Those printouts contained errors and inconsistencies, and the CRA’s witness acknowledged she had not reviewed the underlying returns or assessments themselves.
The issue
Section 160 only bites when four conditions are all met. The Federal Court of Appeal set them out in Canada v Livingston, 2008 FCA 89: (1) there was a transfer of property; (2) the transferor and transferee were not dealing at arm’s length (spouses qualify automatically); (3) the transferee gave no consideration, or consideration worth less than the property; and (4) the transferor was liable to pay tax under the Act in or for the year of the transfer or a preceding year. If any one of the four is missing, the assessment cannot stand.
In Vasilkioti, the first three conditions were not seriously in dispute — a spouse received a half-interest in a home. The fight was over the fourth condition: had the CRA actually established that the husband owed the underlying tax that the derivative assessment was meant to collect? That turned on a question of evidence and burden of proof. Ordinarily a taxpayer carries the onus of demolishing the Minister’s assumptions. But where the relevant facts — here, the transferor’s own tax history — are peculiarly within the CRA’s knowledge and the transferee has no realistic access to them, the practical burden of putting forward reliable proof can shift to the Crown.
What the Court decided (and why)
The Tax Court allowed the appeal and vacated the section 160 assessment. The core reason was evidentiary: the CRA had not reliably proven that the husband owed the tax debt on which the derivative assessment depended. Internal computer-generated summaries, riddled with errors and unsupported by the actual returns or assessments, were not enough to discharge that burden, particularly when the Crown’s own witness had not examined the source documents.
Two threads are worth pulling out:
- The underlying liability is a real element, not a formality. A section 160 assessment is derivative — it depends entirely on the transferor genuinely owing tax. If that foundation is not proven, the whole assessment collapses, no matter how clear the transfer or the relationship.
- The quality of the CRA’s evidence matters. The Minister’s assumptions are not a substitute for proof where the underlying facts lie within the CRA’s own files. When the Crown chose to rely on flawed printouts instead of the actual returns and assessments, it left a gap that the Court would not fill in its favour.
It is important to be precise about what the decision does and does not stand for. Vasilkioti is not authority that spousal transfers of a family home escape section 160 — they routinely do not. It is authority that the CRA must actually establish each statutory condition, including the transferor’s underlying tax debt, on reliable evidence.
Why this decision matters / practical takeaways
For anyone facing — or worried about — a section 160 assessment, several practical points emerge:
- A spouse can be assessed years after the fact. Section 160 contains no limitation period. A transfer made in 2012 produced an assessment in 2019. Receiving the other spouse’s interest in a home, a vehicle, or a bank balance can come back long after the marriage paperwork is forgotten.
- There is no due-diligence or innocence defence. It does not matter that the transferee did not know about the tax debt or had no intention to help anyone avoid tax. The Federal Court of Appeal made that plain in cases such as Canada v Heavyside, 1996 CanLII 3932 (FCA). The defences that work are technical: attacking one of the four Livingston conditions, or the valuation of the benefit.
- Consideration is the most common pressure point. Liability is limited to the excess of the property’s value over what the transferee actually gave. Genuine, provable consideration — assuming a mortgage, releasing real support obligations, paying money — can reduce or eliminate the assessment. Documentation is decisive.
- The underlying assessment can be challenged. Vasilkioti shows the transferee can put the CRA to the proof of the transferor’s debt. If the primary assessment is itself wrong, statute-barred, or unproven, the derivative assessment falls with it.
- The right relationship matters. Section 160 reaches spouses, common-law partners, minors, and other non-arm’s-length persons. The Federal Court of Appeal’s decision in Enns v Canada, 2025 FCA 14 — holding that a widow receiving an RRSP after death was no longer a “spouse” for these purposes — is a reminder that the relationship element is worth examining carefully on the precise facts.
If you receive a section 160 (or its GST/HST cousin, section 325 of the Excise Tax Act) assessment, the worst response is to assume it is correct and pay. As Vasilkioti illustrates, these assessments can be vulnerable on the facts, the valuation, and the strength of the CRA’s own records.
How Barrett Tax Law approaches section 160 files
Our approach to derivative-liability files is methodical. We start by testing each of the four Livingston conditions against the documents: Was there really a transfer, and of what? What was the relationship at the relevant date? What consideration actually moved — and can it be proven? And, crucially, did the transferor owe tax at the time, and has the CRA proven it on reliable evidence rather than internal summaries?
From there, we look at valuation (what was the benefit truly worth, net of mortgages and obligations?), at the underlying assessment (is it correct, or even statute-barred?), and at the procedural posture — whether the matter is better resolved at the objection stage or carried forward to the Tax Court of Canada. Many of these disputes overlap with audit representation and net worth audit issues on the transferor’s side, and understanding how evidence and the burden of proof work in Tax Court is central to building the response. If you have received a section 160 assessment, you are welcome to reach out for a free, no-obligation consultation so we can review the facts with you.
This article is commentary on a public court decision — Vasilkioti v The King, 2024 TCC 101 (available on CanLII) — provided as general information only. It is not legal advice, and outcomes always depend on the specific facts of each case.
Frequently asked questions
What is a section 160 assessment?
Section 160 of the Income Tax Act lets the Canada Revenue Agency collect a tax debtor's unpaid tax from a third party who received property from that debtor for less than fair market value while the debt existed. It most often applies between spouses or other non-arm's-length parties. The recipient becomes jointly and severally liable for the debtor's tax, up to the value of the benefit they received.
Why did the taxpayer win in Vasilkioti v The King, 2024 TCC 101?
The Tax Court vacated the roughly $72,000 derivative assessment because the CRA failed to reliably prove that the transferor spouse actually owed the underlying tax. Instead of producing the husband's filed returns and notices of assessment, the Crown relied on internal computer printouts that contained errors, and its witness had not reviewed the source documents. Without proof of the underlying liability, the section 160 assessment could not stand.
Does section 160 apply to transferring a share of the family home to a spouse?
Yes, it can. Transferring a half-interest in a home to a spouse is a classic section 160 scenario when the transferring spouse owed tax at the time and the receiving spouse gave little or nothing in return. Vasilkioti did not change that. The taxpayer there succeeded on an evidentiary point about the underlying debt, not because spousal home transfers are exempt.
Is there a due-diligence or innocence defence to section 160?
No. Courts, including the Federal Court of Appeal in Canada v Heavyside (1996 CanLII 3932), have confirmed there is no defence based on not knowing about the tax debt or not intending to avoid tax. The effective defences are technical: showing that one of the four statutory conditions is not met, that real consideration was given, or that the underlying tax debt has not been proven.
How long does the CRA have to issue a section 160 assessment?
Section 160 has no limitation period, so the CRA can assess a transferee years after the transfer. In Vasilkioti, the transfer occurred in 2012 and the derivative assessment was issued in 2019. This is one reason these assessments often surprise the people who receive them.
What should I do if I receive a section 160 assessment?
Do not assume it is correct or pay it automatically. These assessments can be challenged on whether a transfer occurred, the relationship of the parties, the consideration given, the value of the benefit, and whether the CRA has actually proven the transferor's underlying tax debt. It is worth having the facts and documents reviewed before responding or before the objection and appeal deadlines pass.