Beneficio

"In answering this question, the judge undertook the following analysis:\n\n[17] This Court dealt at length with the concept of market value in relation to the concept of the purchaser having a special interest, and it acknowledged that it is possible, in certain circumstances, for a purchaser to have a special interest in acquiring property for a price higher than what others would be prepared to pay. In Morneau v. Canada, [1998] T.C.J. No. 680 (Q.L.), Dussault J. set out a number of doctrine and case law passages dealing with this issue, in particular, the comments made by Joyal J. in Dominion Metal & Refining Works Ltd. v. The Queen, 86 DTC 6311 (F.C.T.D.). Moreover, in Morneau, Dussault J. concluded in the existence of a special purchaser and spoke of how to deal with the issue of persons not at arm’s length:\n\n43 Since in our law the concept of market value presupposes an open and unrestricted market, it is also wrong to say that the value which property would have for a potential purchaser desiring to use it for different purposes can be disregarded on the ground that he is the only one who wants to use it for those purposes, there is no competition in the market for this use and the value is thus purely subjective. To do so would be to disregard one aspect of the situation, with the result that the appraisal exercise would become highly theoretical, disconnected from the specific circumstances of the case under consideration and so very questionable.\n\n44 Several other decisions mentioned or analysed by Joyal J. in Dominion Metal & Refining Works Ltd., supra, establish that two relevant factors in determining the value of property are the possibility of using the property in accordance with its special features and its use contemplated by a special purchaser. Two such decisions are those of the House of Lords in Vyricherla Narayana Gajapatiraju v. The Revenue Divisional Officer, Vizagapatam, [1939] A.C. 302, and the Supreme Court of Canada in Fraser v. The Queen, [1963] S.C.R. 455. Joyal J. also mentioned Laycock v. The Queen, 78 D.T.C. 6349 (F.C.T.D.), and 931 Holdings Limited v. M.N.R., 85 D.T.C. 388 (T.C.C.), and he analysed the Tax Review Board’s decision in Lakehouse Enterprises Ltd. et al. v. M.N.R., 83 D.T.C. 388. The least that can be said on reviewing these decisions is that it is impossible to disregard the special interest which a potential purchaser may have in acquiring property for a value higher than what others would be prepared to pay, in view of the special circumstances in which it finds itself and the use it intends to make of the property, to the extent that such an interest can be demonstrated at a given date.\n\n. . .\n\n47 While the determination of fair market value presupposes a transaction between people who are dealing with each other at arm’s length, I agree with the view that this question must be answered by looking at the particular circumstances of a given case, and not by reference to the presumption stated in s. 251(1)(a) of the Act that related persons are deemed not to deal with each other at arm’s length.\n\n[18] In Morneau, Dussault J. reminds us of what is required to apply subsection 15(1) of the Act. I will set out his comments on this issue, which are found in paragraphs 31 and 32 of his reasons:\n\n31 It should be noted that under s. 15(1) the Court must first determine whether a benefit was conferred on a shareholder in that capacity. Such a finding can only be made by looking at all the particular circumstances surrounding a given transaction. If a benefit was so conferred, its value must then be determined. It is primarily at this stage that the application of certain accepted principles of appraisal becomes truly relevant. The fact that a transaction between a company and a shareholder does not at first sight appear to have been made at the fair market value does not necessarily mean that a benefit was conferred by the company on its shareholder qua shareholder. Having said that, I hasten to add that although a transaction such as a sale of property which at first sight appears to have been made for an amount below or above the fair market value may of course be an indication in this regard, it must still be established that in the circumstances this transaction was not a genuine commercial transaction between the parties.\n\n32 In the recent Federal Court of Appeal judgment in Canada v. Fingold, [1998] 1 F.C. 406, Strayer J.A. referred on this point to the classic comments of Cattanach J. in Minister of National Revenue v. Pillsbury Holdings Ltd., [1965] 1 Ex. C.R. 676 (Ex. Ct.), at p. 684, on the real meaning to be given to the equivalent provision of the Act as applicable prior to 1972, namely s. 8(1)(c). These comments read as follows, at p. 413 of Fingold:\n\n. . . in my view, there can be no conferring of a benefit or advantage within the meaning of paragraph (c) where a corporation enters into a bona fide transaction with a shareholder. For example, Parliament could never have intended to tax the benefit or advantage that accrues to a customer of a corporation, merely because the particular customer happens to be a shareholder of the corporation, if that benefit or advantage is the benefit or advantage accruing to the shareholder in his capacity as a customer of the corporation. It could not be intended that the Court go behind a bona fide business transaction between a corporation and a customer who happens to be a shareholder and try to evaluate the benefit or advantage accruing from the transaction to the customer.\n\nOn the other hand, there are transactions between closely held corporations and their shareholders that are devices or arrangements for conferring benefits or advantages on shareholders qua shareholders and paragraph (c) clearly applies to such transactions . . . It is a question of fact whether a transaction that purports, on its face, to be an ordinary business transaction is such a device or arrangement.\n\nAlthough Judge Dussault was able to conclude from the facts and circumstances in Morneau that the price negotiated was entirely normal and reasonable in view of the purchaser’s special needs, the Tax Court of Canada judge held that “[i]n the instant case, the evidence does not show that actual negotiations took place between the parties” (paragraph 23). The Tax Court of Canada judge went on to say:\n\n[24] Contrary to Morneau, in the instant case we do not find an actual need to purchase t"