Principal Issues: Whether a copy of a set-off notice may be disclosed to a trustee.
Position: Yes.
Reasons: Under paragraph 241(4)(k) of the Act, the trustee is legally entitled to it.
February 26, 2010
Business Returns Directorate HEADQUARTERS
Business Accounting Programs Division Income Tax Rulings
Directorate
Attention: Darryl Rutz Lindsay Frank
Manager, Accounting Adjustments (613) 948-2227
Field Enquiries Section
2009-035163Disclosing Taxpayer Information to a Trustee
This is in reply to an email from Paul Masson. At issue is whether taxpayer information could be disclosed to a trustee.
The trustee of a bankrupt corporation has requested a copy of a set-off notice that the CRA has received from another government department. Pursuant to subsection 164(2) of the Income Tax Act (the "Act"), instead of refunding or repaying an amount to a taxpayer, the Minister may apply it to an amount payable by that taxpayer to that other government department.
Subsection 241(1) of the Act generally prohibits disclosure of taxpayer information to any person. Subsection 241(10) defines "taxpayer information" to include information of any kind and in any form, relating to one or more taxpayers, that is obtained by, or on behalf of, the Minister for the purposes of the Act. Given this definition, the set-off notice received by the CRA pursuant to subsection 164(2) of the Act constitutes "taxpayer information".
However, there are exceptions to the general rule prohibiting disclosure of taxpayer information. For instance, under paragraph 241(4)(k) of the Act, taxpayer information may be disclosed to a person otherwise legally entitled to it under an Act of Parliament, solely for the purposes for which that person is entitled to the information. Section 2 of the Bankruptcy and Insolvency Act ("BIA") defines a "trustee" to mean a person appointed under the BIA. The BIA is an Act of Parliament; therefore, taxpayer information may be disclosed to a trustee.
It must be emphasised, nonetheless, that taxpayer information may be disclosed as stipulated in paragraph 241(4)(k) of the Act, that is, only on a needs basis. In this instant case, the trustee requires a copy of the set-off notice to inform the creditors of the estate of the delay in receiving a dividend from the estate. Under the circumstances, disclosure is permitted. An explanation follows.
A person, who is bankrupt, ceases to have any capacity to dispose of, or otherwise deal with, his or her property, in accordance with section 71 of the BIA; such property vests in that trustee. Pursuant to subsection 16(5), no person is entitled to withhold possession from the trustee of any paper or documents relating to the accounts of the bankrupt. In addition, under subsection 164(1), the trustee can require a person to deliver among other things, documents pertaining to the bankrupt. As such, a copy of the set-off notice may be provided to the trustee.
Should you need clarification or additional information, please do not hesitate to call Lindsay Frank at the number provided above.
B.J. Skulski
Manager
Insolvency and Administrative Law Section
Ontario Corporate Tax Division
Income Tax Rulings Directorate
c.c. Paul Masson
Accounting Adjustments Field Enquiries Section
Business Accounting Programs Division