In McCague v. The King, 2025 TCC 59, one of the issues before the Tax Court of Canada was a section 160 reassessment. The Court upheld a section 160 assessment under the Income Tax Act against a 50% corporate shareholder who received a dividend while the corporation had an outstanding tax liability.

Mr. McCague and his business partner each owned 50% of a construction company, 2189632 Ontario Inc. When the company paid out dividends - despite owing over $76,000 in taxes - CRA reassessed both shareholders personally under section 160, which allows the Minister to recover unpaid corporate tax from individuals who received assets for less than fair market value from a non-arm’s length transferor.

Justice Ezri found that although the shareholders were not related, they acted “in concert” and with a “common economic interest” in declaring and receiving the dividend. This, combined with their joint control of the business, made it a factual non-arm’s length relationship. As a result, the Court confirmed that both shareholders were liable for the corporation’s tax debt up to the amount received.

This case reinforces how easily taxpayers can be exposed to section 160 liability - even years later - simply by receiving a dividend or transfer from a corporation they control. Importantly, intent to evade tax is not required. The test focuses on non-arm’s length relationships and inadequate consideration.

At our firm, we routinely assist clients in responding to section 160 assessments - whether through CRA appeals or representing clients at Tax Court. If you’ve received funds from a company with tax debt, CRA may come after you personally. It’s essential to understand your exposure and assert a proper defense early.

Nothing in this article constitutes legal advice and no solicitor-client relationship is created. If you require legal advice pertaining to your specific situation, please contact our tax lawyer. ​ 

Please note that this post is only as current as its publishing date indicates, but the relevant rules - and guidance on their interpretation - change constantly.  

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