Section 160 of the Income Tax Act (and section 325 of the Excise Tax Act for GST/HST) imposes joint and several liability on a person who receives property from a tax debtor for less than fair market value. Four elements must be present: a transfer of property; a non-arm's-length relationship between transferor and transferee; an existing or impending tax debt of the transferor; and consideration that is less than the property's fair market value.
The transferee's liability is capped at the value of the property received minus any consideration given. Common scenarios include spousal real-estate transfers, dividends paid by a corporation in arrears, and family-trust distributions. Defences typically turn on verifying the underlying tax debt, the relationship, the fair market value, the consideration, and the timing of the transfer.