• CRA Getting Aggressive in Asserting Deemed Trust over Mortgage Proceeds
  • May 24, 2011
  • Law Firm: Aird Berlis LLP - Toronto Office
  • Unremitted source deductions are subject to a deemed trust in favour of the Crown under Section 227 of the Income Tax Act (the “ITA”), Section 86 of the Employment Insurance Act (the “EIA”) and Section 23 of the Canada Pension Plan (the “CPP”). Subsection 227(4) of the ITA creates the trust for income tax deductions and Subsection 227(4.1) creates a super-priority lien in favour of the Crown, in the amount of the trust, over all the debtor’s assets. This Crown lien is subordinate only to the rights, under the Bankruptcy and Insolvency Act, of a supplier who has supplied 30-day goods or who is a farmer, fisherman or aquaculturist, and only in a bankruptcy or receivership of the debtor. An exemption from the effect of the deemed trust and lien is created, however, by legislation which carves-out a “prescribed security interest” from the application of Subsections 227(4) and 227(4.1). This structure is mirrored for employment insurance premiums in the EIA, and for CPP premiums in the CPP.