Bookkeeping Error

"While the taxpayer was away on vacation during the summer of that year, his daughter, then an inexperienced bookkeeper, used a presigned blank cheque of his corporation’s bank account to pay an amount of $28,490.37 requested by the law firm representing her father to complete the purchase of his new home. The payment was erroneously posted as a corporate expense (legal corporate) while it should have been debited to the shareholder’s loan account. At all relevant times, this taxpayer’s shareholder loan account with the Corporation had a credit balance of not less than $150,000.\n\nAfter the error was discovered in 1991, the corporate expense was disallowed, the corporation was reassessed to increase its income by that amount and the taxpayer was also reassessed to increase his income by the same amount on the basis that the corporation had conferred a benefit upon him as shareholder pursuant to subsection 15(1) of the Income Tax Act."