Tax Court

"In allowing the taxpayer’s appeal, Mogan J.T.C.C. interpreted subsection 15(1) as follows:\n\nI think a benefit may be conferred within the meaning of subsection 15(1) without any intent or actual knowledge on the part of the shareholder or the corporation if the circumstances are such that the shareholder or corporation ought to have known that a benefit was conferred and did nothing to reverse the benefit if it was not intended. I am thinking of relative amounts. If there is a genuine bookkeeping error with respect to a particular amount, and that amount is truly significant relative to a corporation’s revenue or its expenses or a balance in the shareholder loan account, a court may conclude that the error should have been caught by some person among the corporate employees or shareholders or outside auditors. Shareholders should not be encouraged to see how close they can sail to the wind under subsection 15(1) and then plead relief on the basis of no proven intent or knowledge.\n\nWe have not been persuaded that the intervention of this Court is justified.\n\nIn our view, Judge Mogan properly assessed the facts when he concluded that it was through the taxpayer’s “ignorance and innocence in not knowing that an error had been made when the amount of $28,490 was posted” as a corporate expense when it should have been debited to the shareholder’s loan account. There is nothing in Judge Mogan’s findings that is not reasonably supported by the evidence before him."