As we have previously written here and here, a taxpayer’s debts can be imposed on their spouse or children through an assessment under section 160 of the Income Tax Act (“ITA”). The Federal Court of Appeal has now drawn a line in the sand limiting the reach of such assessments with respect to the spouse of a tax debtor.
In Enns v. The King, 2025 FCA 14, the Court held that a survivor ceases to be the spouse of a deceased taxpayer for the purposes of section 160 of the ITA. While the ruling is a win for survivors, it leaves open the question of how far the CRA’s assessment powers under section 160 may extend.
Enns v. The King – Background
Marlene Enns’ deceased husband, Peter Enns, had named her the sole beneficiary of his Registered Retirement Savings Plan (“RRSP”). At the time Peter passed away in 2013, the fair market value of the RRSP was $102,789.52. However, Peter also had an outstanding debt under the ITA greater than the value of the RRSP, which prompted the CRA to assess Marlene as Peter’s “spouse” under section 160 of the ITA, holding her liable for the amount of the RRSP.
The TCC’s Ruling
The judgment of Russell J. of the Tax Court of Canada relied on the earlier decision of Kuchta v. The Queen, 2015 TCC 289 (“Kuchta”), to find that Marlene did not cease to be the “spouse” of Peter on his death. In the Kuchta decision, Graham J. found that for the purposes of section 160 of the ITA, a “spouse” includes a widow or widower.
The FCA’s Decision
The Court rejected the TCC’s decision through a textual, contextual, and purposive analysis of the term “spouse”, finding that:
- The ordinary meaning of “spouse” is a person married to another individual and since marriage ends on death, the survivor ceases to be a “spouse” of the deceased.
- The deeming rule in the ITA’s definition of “common-law partner” only applies while both partners are still living, such that a common-law partnership also ends on death.
- Parliament’s intent under section 160 of the ITA was not to impose such significant tax liabilities on a person that was transferred an RRSP as a designated beneficiary following the death of their partner.
Takeaways
The FCA’s ruling clearly signals that the reach of the CRA’s assessment powers under section 160 of the ITA is not meant to extend indefinitely through an expanded definition of “spouse”. The purpose of the provision is to prevent tax evasion through transfers of property between living spouses or other non-arm’s length individuals.
The ruling also provides some needed relief to survivors, ensuring they are not burdened with additional financial hardship due to their deceased partner’s tax liabilities. However, the FCA did not address other situations where there has been an irreparable breakdown in the spousal relationship. It remains an open question what effect these situations, such as estrangement, may have on the scope of the CRA’s assessment powers under section 160 of the ITA.