Issue The recent Federal Court of Appeal decision in Enns v Canada, 2025 FCA 14, concerning the definition of "spouse" under Section 160 of the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.). The court ruled that Marlene Enns, the widow of Peter Enns, is not liable for her late husband's unpaid tax debts, as the definition of "spouse" does not extend to widows after the death of their partners.
Facts
Marlene Enns inherited an RRSP worth over $102,000 from her late husband, Peter Enns, in 2013. The Canada Revenue Agency (CRA) assessed Peter’s tax debt, totaling nearly $150,000, and attempted to recover the amount from Marlene under Section 160. This section allows the CRA to collect unpaid tax from individuals who receive property from a spouse or common-law partner for less than fair market value. The CRA argued that Marlene, as Peter’s spouse, was liable for his tax debt because she had received the RRSP.
Marlene contested the CRA's claim, asserting that as Peter’s widow, she was no longer considered a "spouse" under the law, and therefore Section 160 should not apply. The Tax Court of Canada initially ruled against her, holding that she remained a "spouse" for the purposes of Section 160 even after Peter's death.
Court Decision
The Federal Court of Appeal reversed the Tax Court's decision. The Court determined that the term "spouse," as defined in both legal and dictionary terms, refers to a person who is married. The Court further clarified that a marriage ends at the moment of one spouse’s death. Therefore, Marlene was no longer considered Peter’s spouse when she inherited the RRSP, and Section 160 did not apply to her.
The Court also ordered the CRA to cover Marlene’s legal fees. The decision provides clarity on the definition of "spouse" in relation to tax law and ensures that surviving spouses are not held liable for their deceased partner's tax debts under Section 160.
Legal Implications
This case clarifies the scope of Section 160 of the Income Tax Act, particularly regarding the application of the term "spouse." By establishing that a widow is not considered a spouse for the purposes of this provision, the Court has limited the CRA’s ability to collect unpaid taxes from surviving spouses based on inherited property. The decision also highlights the need for clear definitions in tax law, particularly in cases where familial relations and tax responsibilities intersect.
Additionally, the Court’s ruling may have broader implications for other cases involving tax liabilities and inherited assets, particularly for those who inherit property from spouses or common-law partners. The case also emphasizes the importance of the legal protections surrounding RRSPs and similar deferred tax plans, as tax on these funds is typically delayed until they are withdrawn.
Conclusion
The Federal Court of Appeal’s decision in Enns v. Canada is a significant ruling for both the tax law community and surviving spouses of individuals with outstanding tax debts. By establishing that a deceased spouse’s widow is not liable for tax debts under Section 160, the Court has provided important legal clarity, and ensured that surviving spouses are not unfairly burdened by the tax obligations of their deceased partners. This decision may prompt further scrutiny of tax collection provisions and their application in cases involving family members.
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