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INCOME TAX

Income calculation

Canada v. Franklin

A-635-00

2002 FCA 38, Rothstein J.A., Strayer J.A. dissenting

28/1/02

4 pp.

Benefit conferred on shareholder--Appeal from T.C.C. Judge allowing respondent's appeal from assessment by MNR under ITA, s. 15(1)--Homeguard Video Sytems Ltd. (HVSL), owned by respondent and wife, purchased condominium in Florida--Monies for purchase advanced out of respondent's personal resources and reflected as shareholder's loan in HVSL books--Shortly thereafter, undivided one half interest sold for $59,423--Respondent recipient of sum, which he used to acquire automobiles for HVSL--Because proceeds paid to respondent, MNR assessed respondent under ITA, s. 15(1) (benefit conferred on shareholder)--T.C.C. Judge found no receipt of benefit by respondent and allowed appeal, considering matter as series of bookkeeping errors in HVSL's statements--Appeal dismissed (Strayer J.A. dissenting)--Per Rothstein J.A.: No palpable or overriding errors in T.C.C. Judge's assessment of facts that would justify Court's intervention--Asset and shareholder's loan accounts of HVSL did not accurately reflect fact respondent received proceeds of sale of one half interest in condominium unit owned and sold by HVSL--Judgment not to be interpreted as condoning taxpayers negligently keeping inaccurate records or deliberately not disclosing transactions--Per Strayer J.A. (dissenting): Appeal should be allowed--T.C.C. Judge either committed error of law in interpretation of "benefit" in ITA, s. 15(1) or committed palpable error of fact, or both--Failed to find respondent in fact received benefit of sum of $59,423 by directing proceeds of sale of company's properties to own bank accounts or for reduction of personal debts, with no strings attached--Whatever occurred or did not occur thereafter irrelevant to whether received benefit--Income Tax Act, S.C. 1970-71-72, c. 63, s. 15(1).

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