http://decision.tcc-cci.gc.ca/tcc-cci/decisions/en/item/108371/index.do 
Parihar v. The Queen (March 3, 2015 – 2015 TCC 52, Bocock J.).
Précis: The appellant, Rabinder Parihar, was a shareholder along with her husband, Randy, of Aaremic Travel Corp. (“Aaremic”). In 1998, at a time when Aaremic had a substantial income tax liability, it transferred $100,000.00 to Rabinder who initially held the funds in a term deposit. She was assessed under subsection 160(1) of the
Income Tax Act (the “Act”) for the full value of the funds transferred. She argued that the funds were transferred to protect them from another potential creditor and she held them in trust for Aaremic. The Court rejected the trust argument and also rejected her argument that issue estoppel precluded her being assessed under both sections 15 (shareholder benefits) and 160. Finally the Court rejected her contention that she dealt at arm’s length with Aaremic.
The appellant, Michael Parihar, was the son of Rabinder Parihar. In 2009, at a time when she owed income taxes, Rabinder transferred to Michael a partial interest in a condominium which she had acquired with her husband in 2008. In 2012 CRA assessed Michael in respect of the transfer. Michael argued that he was a part owner of the property all along since the agreement of purchase and sale referred to purchase by “R & R Parihar and/or Nominee” and he was that nominee. The Court rejected that claim. There was insufficient evidence to support Michael having any interest in the property prior to 2009.
Decision: This is a decision with a convoluted factual background and is not likely to be of much interest to most readers. Rabinder and her husband owned Aaremic, a travel agency which owed a considerable amount of back taxes. In 1998 Aaremic transferred $100,0000.00 to Rabinder:
[6] On July 15, 2002, the Minister assessed Aaremic’s 1996, 1997, and 1998 taxation years and accordingly issued notices on that date. On December 28, 2006, the Minister further reassessed Aaremic’s 1996, 1997, and 1998 taxation years pursuant to a waiver signed by Randy on behalf of Aaremic.
[7] As a result of the further reassessments, Aaremic became indebted for taxes related to its 1996, 1997, and 1998 taxation years in the total amount of $183,834.02 (the “Tax Debt”).
[8] Previously, at or around November 28, 1998 (the “Date of Transfer”), Randy became aware that a client was considering suing Aaremic. To protect Aaremic’s assets, Randy directed Aaremic to transfer funds to Rabinder in order to protect those funds from a potential garnishment by the client. On the Date of Transfer, Aaremic transferred $100,000 into a Scotiabank GIC (the “GIC”) in Rabinder’s name.
Most of the funds then went into RRSPs for Rabinder, her husband and her children. Some of the funds were deposited in Aaremic’s bank account. In 2001 a declaration of trust was executed, back-dated to 1998, stating that the funds were held by Rabinder in trust for Aaremic.
Rabinder had also, prior to the subsection 160(1) assessment, been assessed for shareholder benefits from Aaremic pursuant to subsection 15(1) of the Act:
[13] On November 6, 2006, Rabinder signed a waiver agreeing to be reassessed on the basis that her shareholder benefits and unreported income for 1996, 1997, and 1998 would be reduced by $308,671, $431,002, and $74,437, respectively, and gross negligence penalties would be deleted (the “Rabinder Waiver”).
[14] The first provision of the Rabinder Waiver reads as follows:
“I waive my right of objection or appeal in respect of all issues if Canada Revenue Agency re-assesses as follows:
1. Reduce the amount of the subsection 15(1) benefit by $300,369, $426,710 and $70,239 for the 1996, 1997 and 1998 taxation years respectively with respect to temporary investments in GICs and securities made on behalf of Aaremic Travel Corp.”
[15] On January 29, 2007, Rabinder’s 1996, 1997, and 1998 taxation years were reassessed in accordance with the terms resolved with the Minister.
[16] On October 30, 2009, the section 160 assessment at issue was raised against Rabinder in respect of the Tax Debt and the transfer of funds by Aaremic into the GIC in Rabinder’s name on the Date of Transfer.
[17] As a result of the further reassessments of these taxation years, as of March 22, 2012, Rabinder remained indebted for taxes, penalties, and interest related to her 1996, 1997, and 1998 taxation years in the amount of $232,912.80.
Rabinder raised a number of defences in respect the subsection 160(1) assessment.
The Court rejected her argument that the funds were held in trust:
[39] Similarly, in Rose v. Canada, 2009 FCA 93 (“Rose”), the taxpayer’s husband transferred a half interest in their matrimonial home to the appellant in order to avoid a creditor. Like Raphael, the taxpayer claimed that her husband had only transferred legal title (not beneficial title) in order to avoid a creditor who threatened to put a lien on the property. Again, the Federal Court of Appeal found that a trust was inconsistent with an exclusive or predominant intention to keep property safe from creditors.
[40] Lastly, the evidence, if any, of a trust is inadequate. In order to support a finding that property is not owned by the individuals who hold legal title, especially between related parties, the law requires “very cogent evidence”:
Campbell v. Canada, 2009 TCC 431, at paragraph 43. The following are critical evidentiary weaknesses in Rabinder’s argument that a trust existed:
(a) the Trust Declaration was not signed until June 1, 2000, long after the Date of Transfer;
(b) the Trust Declaration was backdated, effective December 1, 1998, which “backdating”, if acceptable, nonetheless gave effect to the “trust” after the Date of Transfer (November 24, 1998);
(c) Rabinder was not aware of the Trust Declaration or related arrangement; and
(d) on March 1, 1999, approximately $63,000 was transferred from the $100,000 GIC to the Joint Account and subsequently to RRSPs belonging to Randy, Rabinder, and their children, who as ultimate beneficiaries do not include the alleged beneficial owner: Aaremic.
[41] In light of the above, the contention that Rabinder held the funds in trust for Aaremic is neither supported by the law nor the facts and cannot be accepted by this Court.
The Court also found that there was no issue estoppel arising out of the assessment of Rabinder for shareholder benefits:
[45] In
McGonagle TCC [2009 TCC 168, 2009 DTC 1120], this Court was faced with the issue of whether Rabinder was precluded by subsection 169(2.2) of the Act from appealing the assessment of the 1996 to 1998 taxation years subject to the Rabinder Waiver. This Court did not adjudicate on the issue of the assessment of Rabinder’s shareholder benefits. In support of an assessment under subsection 15(1), a benefit must have been conferred on a shareholder while there is no similar requirement that a benefit be conferred to assess pursuant to subsection 160(1). Finally, a shareholder who has been assessed under subsection 15(1) can also be assessed under subsection 160(1) given the different purposes of the two provisions. As this Court found in
Bleau, subsection 160(1) may be applicable to an amount transferred, notwithstanding that the same amounts may have already been taxed under the provisions of subsections 15(1) and (2).
Finally the Court rejected the argument that she dealt at arm’s length with Aaremic:
[46] Rabinder’s arguments cannot succeed under either subparagraphs 251(2)(b)(ii) and (iii); a finding that she was related to Aaremic under either of these subparagraphs is sufficient for the purpose of the definition within paragraph 251(2)(b). For this reason, it is not necessary to make a determination of whether Rabinder was a directing mind and controlled Aaremic.
[47] Subparagraph 251(2)(b)(ii) deems a person to be related to a corporation if the person is a member of a related group that controls the corporation. Rabinder argues that she could not have been part of a related group that controlled Aaremic as only one person (Randy), and not a group, controlled Aaremic. However, Rabinder and Randy were related by marriage and were thus, together, members of a related group of persons that controlled Aaremic.
[48] Similarly, subparagraph 251(2)(b)(iii) deems a person to be related to a corporation if she is related to a person who controls the corporation, if the corporation is controlled by one person. The presumption is irrebuttable:
Fluxgold v. R, 90 DTC 6187 (FCTD) at paragraph 26. Even if Aaremic were controlled by Randy alone, Rabinder was still related to Randy by marriage and Randy, in turn and as admitted, controlled Aaremic. Definitionally, the definitions are plainly and clearly worded. Rabinder was not arm’s length to Aaremic because of her non-arm’s length relationship to the controlling person: Randy.
Michael’s argument that he was a part owner of the property from 2008 and the 2009 transfer to him by his mother only documented that prior interest was not accepted by the Court:
[56] Michael cannot have maintained against a third party that he held the One-Third Interest until he was registered as an owner on the Registration Date. The Torrens system does not recognize private arrangements for the division of land ownership, unless, as noted, same are reflected in some way upon the parcel register of land. Factually, a simple caveat or caution or notation in the Initial Transfer of Randy and Rabinder’s partial trustee capacity might have accomplished this, but none occurred so to afford the Land Registrar and others reliance upon the state of the parcel register as regards the alleged undisclosed trust:
Smith v. Graham, 2009 BCCA 192, at paragraphs 16 and 17. Further and consistent with this conclusion, the notation in the APS of “and/or Nominee” is not factually sufficient to constitute evidence of a beneficial interest in favour of a specific person (i.e. Michael) for a specific share (i.e. the One-Third Interest). The APS could easily have reflected this supposed intention by simply stating Randy and Rabinder’s interest qua trustee for Michael. Michael’s absence from the country would not have impeded that reference.
[57] Similarly, neither a specific interest in favour of a specific person, aside from Randy and Rabinder, was noted in the land title system in any manner in the Initial Transfer or any time before the Registration Date, nor was Randy and Rabinder’s supposed capacity as trustees. As well and aside from the legal doctrine of merger, the vague reference to “and/or Nominee” in the APS, as the only documentary or corroborative evidence, is not, on the balance of probability, probative of Michael’s One-Third Interest in the Condo prior to the Registration Date. Therefore, Michael’s interest in the Condo, beneficial or otherwise, did not have legal effect until the Registration Date and was not factually reflected at any time prior to that date by any evidence which, on balance, would constitute a prior ascertainable intention that he held or was to hold a One-Third Interest.
Thus both appeals were dismissed with costs in accordance with the Tariff with the parties free to make any additional submissions as to costs within 30 days.