I Don’t Want That Gift!
When is a gift not a gift? When it is not accepted.
The issue of gifting and acceptance was considered recently in Leclair v. Canada, 2011 TCC 323.
There, a father gifted real property to his daughter. He did so, however, at a time when he was indebted to CRA. CRA assessed the daughter as being liable for the father’s unpaid taxes pursuant to s. 160 of the Income Tax Act. S. 160 renders a recipient of a transfer of property liable for the donor’s unpaid taxes if the recipient was a spouse, under 18 or a person with whom the donor was not dealing at arm’s length.
The court found that the daughter did not have knowledge of the transfer. Upon learning of it, and the father’s liability, she retransferred the property back to her father.
The court considered a number of cases dealing with acceptance of or disclaimer of a gift, and case law to the effect that a failed testamentary gift is not caught by s. 160. It went on to hold that the same rules applied to inter-vivos transfers. A transfer of an inter-vivos gift must be a completed transfer, and not a failed or void transfer, and further, that intent and delivery by one party alone is insufficient to complete a gift. The gift in question was not accepted, and once the daughter had knowledge of it, it was repudiated within an acceptable time. The transfer back by the daughter amounted to a valid disclaimer of the gift, and she was found to not be jointly liable for her father’s tax debt.
Paul E. Trudelle – Click here for more information on Paul Trudelle.