Related parties are persons or entities connected by blood, marriage, adoption or control, whose transactions the CRA scrutinises and often deems to occur at fair market value.
Tax law treats transactions between related parties, and the broader category of non-arm's-length parties, differently from ordinary market deals. Related persons include family members and corporations controlled by the same people. Because such parties may not deal at true market prices, the CRA can deem transactions to occur at fair market value.
This affects transfers of property to family or a controlled corporation, loans, salaries paid to relatives, and much more. Non-arm's-length dealings that are not at FMV can trigger double taxation, denied losses (a loss on a sale to an affiliated party may be denied), and reassessment.
You sell equipment to your own corporation for $1 to move it in cheaply. Because you and the corporation are related, the CRA deems the sale to occur at the equipment's fair market value, with tax consequences on that amount.
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