Reassessment of wound-up and dissolved corporations
This is further to your memorandum of January 15, 1991. You have queried whether you have the authority to reassess a company, incorporated under the Ontario Business Corporations Act (OBCA)
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As a result our comments will reflect these circumstance.
Where a subsidiary has commenced wind-up procedures but has not yet been dissolved, the Department may issue an assessment or reassessment to the subsidiary. Where the subsidiary has been wound up and subsequently dissolved pursuant to the corporate statute under which it was incorporated, we have no authority under the Income Tax Act (the Act) to issue an assessment or reassessment to the dissolved corporation or to its parent in respect of the subsidiary for taxation years prior to the dissolution. Through dissolution, the corporation becomes non-existent. There is no provision in the Act that allows assessment of a non-existent taxpayer. See Lord Elgin Hotel Limited v M.N.R., 69 DTC 5059 (Exch.).
Although the Act does not provide us with the authority to assess a dissolved subsidiary or its parent, certain corporate statutes, such as the OBCA, provide the authority to take action against the shareholder of a corporation following its dissolution. Section 241 of the OBCA provides for the method of dealing with a dissolved corporation after its dissolution.
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Where a liquidator has distributed corporate assets without obtaining a clearance certificate pursuant to subsection 159(2) of the Act, the liquidator is liable for unpaid taxes, interest and penalties of the corporation, pursuant to subsection 159(3) of the Act.
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Should you decide to proceed under section 241 of the OBCA, we recommend that the notice of reassessment be issued to the person upon whom we are entitled to serve the notice, as described above. The notice should make it clear that the assessment relates to a particular taxation year of the dissolved corporation.
We trust the above comments are of assistance to you.
for DirectorBusiness and General DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch