John was a very busy man operating his super market business. As many individuals do, he neglected to file corporate income tax returns and payroll remittances for about four years. Canada Revenue Agency (CRA) was not impressed with John. CRA sent numerous letters to John reminding him of his obligation to file the corporate tax and payroll remittances. John, however, was more interested in organizing the fruit stands and deciding what produce items he should put on sale. John was a shareholder with a few other individuals, including his brother. His brother was a director of the corporation and John was not. CRA estimated an outstanding corporate income tax and payroll tax balance for the corporation of about $400,000.
Consequently, the CRA put a lien on John’s house for $400,000. Directors are responsible for unpaid taxes for a corporation. John’s brother was the director; however, John’s brother did not own any assets. Consequently, CRA could not put a lien on John’s brother’s house or other assets that he did not own. Therefore, CRA put a lien on John’s house. John, however, was not a director. CRA employed a concept called de facto director. This means that someone that is not an actual director is considered a director if they act like one. This however is a nebulous concept and difficult to prove. We argued that the case facts did not support the fact that John was a de facto director; the auditor agreed and removed the $400,000 lien. Congratulations John!
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