Docket: 2019-2144(IT)G
BETWEEN:
MARIO TURCOTTE,
Appellant,
and
HIS MAJESTY THE KING,
Respondent.
[OFFICIAL ENGLISH TRANSLATION]
Appeal heard on July 3, 2025, at Montréal, Quebec
Before: The Honourable Justice Guy R. Smith
Appearances:
Counsel for the Appellant:
Guillaume Branconnier
Counsel for the Respondent:
Renaud Fioramore-Beaulieu
JUDGMENT
In accordance with the attached reasons for judgment, the appeal from the assessment made on June 27, 2017, under section 160 of the Income Tax Act is dismissed with costs.
Signed at Ottawa, Ontario, this 22nd day of July 2025.
“Guy R. Smith”
Smith J.
Translation certified true
on this 2nd day of July 2026.
Melissa Paquette
Citation: 2025 TCC 98
Date: 20250722
Docket: 2019-2144(IT)G
BETWEEN:
MARIO TURCOTTE,
Appellant,
and
HIS MAJESTY THE KING,
Respondent.
[OFFICIAL ENGLISH TRANSLATION]
REASONS FOR JUDGMENT
Smith J.
[1] Mario Turcotte, the Appellant in this case, is appealing from an assessment made on June 27, 2017, by the Minister of National Revenue (the “Minister”
) under section 160 of the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.) (the “Act”
) in respect of dividends paid to him by Global Vidéo inc. (“Global Vidéo”
) while it had a tax debt. The amount claimed is $44,983, which includes $17,150 in tax and $27,833.05 in interest.
[2] Generally, section 160 allows the Minister to make an assessment in respect of a transferee for all or part of the unpaid tax debt of a tax debtor who transfers property to the transferee when the two persons are not dealing with each other at arm’s length. The amount must not exceed the value of the property received, minus any consideration given.
[3] Certain basic principles emerge from the provisions of the Act and the case law, namely (i) section 160 applies only when property is transferred without consideration, which excludes, from the outset, transfers in exchange for services rendered; (ii) the tax debt can include tax payable, withholdings, penalties and interest; and (iii) for the transferee to be liable for the tax debt, it is not necessary for the parties to have intended to avoid the tax debt, or even to have known it existed.
[4] In this case, the transfer of property took the form of dividends paid to the Appellant from 2001 to 2008. It is not disputed that the Appellant was not dealing at arm’s length with Global Vidéo given that he was its sole shareholder. There is also no dispute that the corporation reported and paid to the Appellant a total of $166,114 in dividends from 2001 to 2008. Lastly, it is not in dispute that the Appellant was aware of the tax debt, as he was Global Vidéo’s shareholder and director.
[5] Before addressing the issues, I note that in the notice of appeal, the Appellant is calling the underlying debt into question because he disagrees with the reasons in Global Vidéo Inc. v. The Queen, 2005 TCC 742 (the “Judgment”). However, subsection 171(4) of the Act provides that if the Court has disposed of a particular issue, the parties to the appeal may appeal the disposition to the Federal Court of Appeal, which Global Vidéo did not do.
[6] At the beginning of the hearing, the Appellant stated that he is no longer calling into question the underlying debt and that the only two issues are to determine (i) whether the transfer was carried out without consideration within the meaning of section 160; and (ii) whether the underlying debt was extinguished over time.
[7] I will therefore address the first issue, which concerns consideration.
[8] The Appellant contends that there was consideration because Global Vidéo reported and paid the dividends in exchange for services rendered, and that these services were a form of remuneration. Global Vidéo did not pay any wages, and the Appellant did not receive a T4 during the years at issue even though he had been working for the corporation on a full-time basis. The accountant suggested that it would be simpler and more advantageous, from a tax standpoint, to record the withdrawals made throughout the year and report them as dividends, which he did.
[9] The Appellant relies on a line of cases providing that services rendered may constitute consideration for dividends. In particular, he relies on Davis v. Canada, [1994] T.C.J. No. 242 (Q.L.) (“Davis”), where the judge drew on Mcclurg v. Canada, 1990 CanLII 28 (SCC), [1990] 3 S.C.R. 1020 to arrive at this conclusion within the context of an assessment under section 160. Davis was not appealed, but I agree with the Respondent that it should not be followed because it does not reflect the state of the law today.
[10] Furthermore, in Valovic v. The Queen, 2020 TCC 101 (“Valovic”), Justice Monaghan (now of the Federal Court of Appeal) indicated that Davis has been criticized and is no longer relevant (footnote 8). She also cited several decisions where the taxpayer unsuccessfully argued that the consideration was the services rendered (footnote 9).
[11] At paragraph 17, she stated that “this Court and the Federal Court of Appeal have consistently rejected the argument that consideration may be given for dividends, including in the context of section 160.” In particular, she relied on Neuman v. M.N.R., 1998 CanLII 826 (SCC), [1998] 1 S.C.R. 770 (“Neuman”), where the Supreme Court of Canada asserted that dividends relate to shareholding, not to any consideration the shareholder may have provided.
[12] At paragraph 19, Justice Monaghanindicated that the spouses decided to transform what they were now describing as consideration for services rendered into dividends and that they had to accept the consequences of that decision. She added that their liability under section 160 had to be determined based on what they did, not on what they might have done.
[13] More recently, in Murphy v. The King, 2022 TCC 111 (“Murphy”), Justice Favreau endorsed Valovic, stating the following:
[12] The dispute in this case concerns whether the Appellant provided consideration for the property transferred to him by the Corporation and, if so, whether the fair market value of that consideration exceeded the fair market value of the property transferred to him by the Corporation.
[13] In Neuman … , the Supreme Court of Canada held that a dividend is related to shareholding and not to any other consideration the shareholder might have provided. This position was upheld by this Court in a more recent decision of Valovic v. The Queen, 2020 TCC 10.
[14] On many occasions, this Court has rejected the argument that consideration may be given for dividends including in the context of section 160 of the Act (please refer to Côte v. R., 2003 D.T.C. 813, Valovic cited above and Pauzé v. R., 1998 (CarswellNat 2757).
[15] The fact that the Appellant declared the dividends on his personal income tax return and paid taxes on them does not impact the fact that dividends are not payment for services.
[16] The declaration of a dividend is,in corporate law, an allocation of a company’s undistributed profits to its shareholders and does not depend on the conduct of a given shareholder.
[14] Justice Favreau concluded as follows at paragraph 17:
[17] In this case, no consideration was given by the Appellant for the dividends. Accordingly, the Appellant is jointly and severally liable for the amount of tax liability pursuant to subsection 160(1) of the Act.
[Emphasis added.]
[15] I agree with the analysis in Valovic and Murphy. Even if the dividends paid to the Appellant had to be included in his income, this still constitutes an allocation of the corporation’s profits and not employment income.
[16] In allocating profits as dividends—on his own initiative or on the advice of his accountant—the Appellant engaged in entirely permissible tax planning. However, he cannot, on appeal, carry out retroactive tax planning by reporting that this was actually employment income. In fact, it is well established that a taxpayer cannot make changes to their return on a retroactive basis when that return has had unexpected consequences: Bibby v. The Queen, 2009 TCC 588 at para. 14.
[17] Next, the Appellant relies on Visionic inc. c. Michaud, [1982] J.Q. No. 174 to claim that in Quebec law, a dividend may be paid in consideration of foregone wages or of services rendered, in particular for the purposes of Quebec’s Act respecting labour standards. That decision was mentioned at paragraph 14 of Martel v. The Queen, 2010 TCC 634, but as the Respondent notes, Justice Boyle was careful not to arrive at any conclusion in that regard.
[18] In any event, I am not satisfied by this analysis because the Act respecting labour standards is a law of general application and seems to be about overall income, without distinguishing between employment income, dividends or any other form of income. Section 160 is more targeted in its application: it applies to the transfer of property and excludes services rendered: Aitchison Professional Corporation v. The Queen, 2018 TCC 131 at para. 26.
[19] Next, the Appellant alleges that [translation] “since 2018, Parliament has established several parameters to govern the treatment of dividends from Canadian-controlled private corporations” (Appellant’s Plan of Argument at page 2). In particular, he points to the new provisions on split income at section 120.4 and the introduction of the “reasonable return” concept.
[20] However, I cannot agree with this analysis. The purpose of these provisions is to prevent a corporation’s profits from being distributed as dividends to minors or spouses who are not actively involved in the corporation. In my opinion, it is not necessary to review this issue further. If a corporation is a tax debtor when it pays out the dividends, transferees who are not dealing at arm’s length with the corporation are nevertheless subject to section 160, the concept of reasonable return notwithstanding.
[21] Next, the Appellant raises the Canada Recovery Benefits Act, S.C. 2020, c. 12, s. 2, which provides for the possibility of including dividends as proof of income to obtain a government benefit, as reviewed in Aryan v. Canada (Attorney General), 2022 FC 139.
[22] Again, this is a law of general application recognizing, in particular, that business income may include wages and dividends—namely, the beneficiary’s overall income. I am of the opinion that this statute does not modify the case law developed through Neuman to the effect that a dividend relates to shareholding, not to any consideration provided by the shareholder.
[23] I will now address the second issue, which has to do with the limitation period.
[24] The Appellant contends that the underlying debt was extinguished over time under Quebec law, which provides for a 10-year limitation period. In light of this, the Appellant maintains that the underlying debt has been extinguished because more than 10 years have gone by since the date of the Judgment.
[25] From the outset, it must be acknowledged that private law—in this case, Quebec law—plays a supplementary role in that it fills the gaps in federal law: Marcoux v. Canada (Attorney General), 2001 FCA 92 at para. 13. However, I consider that there are no gaps or ambiguities in the wording of the Act and that Parliament has set out a very specific rule as regards the issue of a limitation period. Subsection 160(2) provides that the Minister may “at any time”
assess a taxpayer in respect of any amount payable because of subsection 160(1).
[26] In Canada v. Addison & Leyen Ltd., 2007 SCC 33, the Supreme Court of Canada underscored that there is no limitation period and that under section 160, the Minister can “at any time assess a taxpayer”
(para. 9). The Supreme Court then reiterated the words of Justice Rothstein (then of the Federal Court of Appeal), who stated as follows:
While in the sense identified by the majority, subsection 160(1) may be considered a harsh collection remedy, it is also narrowly targeted. It only affects transfers of property to persons in specified relationships or capacities and only when the transfer is for less than fair market value. Having regard to the application of subsection 160(1) in specific and limited circumstances, Parliament’s intent is not obscure. Parliament intended that the Minister be able to recover amounts transferred in these limited circumstances for the purpose of satisfying the tax liability of the primary taxpayer transferor. The circumstances of such transactions mak[e] it clear that Parliament intended that there be no applicable limitation period and no other condition on when the Minister might assess. [para. 92]
[Emphasis added.]
[27] While the Minister may “at any time” make an assessment under section 160, the time period applicable to proceedings aimed at collecting the underlying debt is nevertheless subject to subsection 222(3), which provides that “[t]he Minister may not commence an action to collect a tax debt after the end of the limitation period for the collection of the tax debt.”
[28] Subsection 222(4) provides that the “limitation period” ends on the day that is 10 years after the day on which it begins, but subsection 222(5) then provides that the period “restarts” for another 10-year period, in particular if, under paragraph 222(5)(b), “the Minister commences an action to collect the tax debt” or if, under paragraph 222(5)(c), “the Minister, under subsection 159(3) or 160(2) … , assesses any person in respect of the tax debt.”
[29] Bourgeois v. The Queen, 2018 TCC 5 involved an assessment under section 160. The Court reviewed the issue with section 222:
[61] … the limitation period for the collection started to run again when the Minister assessed the appellant under section 160. Paragraph 222(5)(c) dictates that conclusion. Indeed, it is clearly provided that the limitation period starts to run again when an assessment is made under subsection 160(2).
[62] This interpretation of section 222 is also consistent with the phrase “at any time” used in subsection 160(2). From the moment a debt is established under section 160, the Minister therefore has ten years to collect the debt.
[63] However, the ten-year limitation period can vary. Subsection 222(8) provided that the limitation period may vary or be suspended, among other things, when the taxpayer challenges the Minister’s assessment.
[64] In addition, subsection 222(5) lists a series of actions that may be commenced by the Minister to cancel the previous count and thereby restart the ten-year limitation period.
[Emphasis added.]
[30] As stated above, the Appellant claims that the debt was extinguished on November 29, 2015, namely, 10 years after the date of the Judgment. The Respondent disagrees and notes that the limitation period restarts for another 10-year period when the Minister commences an action to collect the tax debt. In this regard, the Respondent maintains that the Canada Revenue Agency (“the CRA”) unsuccessfully attempted to collect the tax debt from Global Vidéo three times—that is, through a garnishment issued to two Canadian chartered banks on December 8, 2010, February 21, 2011, and November 25, 2011—and that this pushed back the limitation period to November 25, 2021.
[31] Although the Appellant alleges that he was not aware of these steps when they were taken, the fact remains that he acknowledged [translation] “the truthfulness” of these facts in his response to a request to admit served by the Respondent. I am of the opinion that the steps the CRA took meet the definition of the word “action” at subsection 222(1), which means “an action to collect a tax debt of a taxpayer and includes a proceeding in a court … ”.
[32] Given these facts, I consider that the limitation period was pushed back 10 years as of November 25, 2011, the date of the last collection attempt.
[33] Alternatively, I am of the view that the limitation period for collecting the debt restarted on June 27, 2017, when the Minister assessed the Appellant, in accordance with paragraph 222(5)(c).
[34] I make these final comments while recognizing that this is a collection issue, over which jurisdiction is assigned to the Federal Court under subsection 222(2): Neuhaus v. Canada, 2002 FCA 391 at paras. 4–6. Therefore, the Appellant remains free to pursue the issue of debt extinguishment.
[35] As stated by Justice Rothstein, who is quoted above, the effect of an assessment under section 160 “may be considered a harsh collection remedy”
for a person who, over time, organizes their affairs as though the debt does not exist. But that was Parliament’s intention.
[36] In the end, I am of the opinion that the Minister acted properly in making the assessment at issue here because the Appellant received dividends from Global Vidéo, a tax debtor whose debt had been confirmed through the November 29, 2005 Judgment. The Appellant had not been dealing with this corporation at arm’s length, and no consideration was given within the meaning of the case law. As a result, he is jointly and severally, or solidarily, liable for Global Vidéo’s tax debt.
[37] For these reasons, the appeal is dismissed, with costs.
Signed at Ottawa, Ontario, this 22nd day of July 2025.
“Guy R. Smith”
Smith J.
Translation certified true
on this 2nd day of July 2026.
Melissa Paquette
2025 TCC 98
COURT FILE NO.:
2019-2144(IT)G
STYLE OF CAUSE:
MARIO TURCOTTE v. HIS MAJESTY THE KING
PLACE OF HEARING:
Montréal, Quebec
DATE OF HEARING:
July 3, 2025
REASONS FOR JUDGMENT BY:
The Honourable Justice Guy R. Smith
DATE OF JUDGMENT:
July 22, 2025
APPEARANCES:
Counsel for the Appellant:
Guillaume Branconnier
Counsel for the Respondent:
Renaud Fioramore-Beaulieu
COUNSEL OF RECORD:
For the Appellant:
Name:
Guillaume Branconnier
Firm:
LDB Attorneys L.L.P.
For the Respondent:
Shalene Curtis-Micallef
Deputy Attorney General of Canada
Ottawa, Canada