Vendors Liable For Purchaser's Tax Debt

In its recent decision in Harvard Properties Inc v. The King, 2024 TCC 139, the Tax Court of Canada held that the vendors of Calgary's North Hill Shopping Centre ("North Hill") were liable under section 160 of the Income Tax Act¹ ("Act") for taxes owing by subsidiary corporations that were sold as part of the North Hill transaction.² The vendors knowingly received a premium for the sale that was only viable if the purchasers did not pay the tax owed by the subsidiaries resulting from the sale of North Hill.³ Consequently, the Court held that the vendor and purchaser were not dealing at arm's length and section 160 applied. Since the vendors did not lead evidence of North Hill's fair market value, the taxpayer's liability was not reduced by the actual value of North Hill.⁴