Suppose you transfer shares to a family trust, which redeems the shares and pays tax on the “deemed dividend” that results; and CRA assesses the trust and confirms the dividend. Can the CRA later reassess you, saying the whole transfer to the trust was a sham, and tax you also on the deemed dividend, so that, for the time being, both you and the trust are assessed tax on the same dividend? Yes, says the Federal Court of Appeal.
“[5] We agree with Justice Miller that it is not plain and obvious that the reassessment under appeal is an impermissible collateral attack by the Minister on the initial assessment of the trust. This Court has said that when facts are in dispute, the Minister may issue inconsistent assessments pending the resolution of the dispute (see, for example, Antle v. Canada, 2010 FCA 280 (CanLII), 2010 FCA 280, Hawkes v. Canada, 97 DTC 5060).”