Situation 1
CRA assesses Spouse A under s. 74.1(1) on the basis that interest received by Spouse B on transferred funds should be included in A’s income.
Situation 2
Partner B (a corporation) is assessed under s. 103 on the basis that 40% rather than 10% of the income of the LP should have been included in its income (so that the share of Partner A, who is a related individual, should have been 60% rather than 90%).
Situation 3
CRA assesses corporation A under s. 56(2) and s. 69(1)(b) on a capital gain of $99,990 on the basis that it had exchanged preferred shares with a FMV of $100,000 for new common shares with a FMV of $10, thereby shifting value to the other shareholder (individual B) which was then realized by B on a sale to a third party.
Is the income allocated to the other taxpayer in Situations 1 and 2 under ss. 74.1(1) and 103 required to be reimbursed by the taxpayer who received the income – and similarly re Situation 3, is B required to reimburse A for the sale proceeds received by him? CRA stated:
[T]he provisions…mentioned...do not provide for a reimbursement obligation by a taxpayer where a benefit was allocated or when income was attributed to another taxpayer. …