http://decision.tcc-cci.gc.ca/tcc-cci/decisions/en/item/64759/index.do 
Cléroux v. The Queen [1] (November 20, 2014) involved the sole shareholder and director of a corporation acquiring all of the shares of its wholly-owned subsidiary for less than fair market value:
[6] The facts with regard to the transaction are as follows:
(a) On March 2, 2000, Les Entreprises de construction Tremesco Inc., a company incorporated pursuant to Part 1A of Quebec’s
Companies Act, acquired an eight-unit semi-detached building with the street numbers 15 and 17 on Daniel-Johnson Street in Hull (now Gatineau). The purchase price of the building was $550,000.
(b) During the month of November 2003, members of the Sauriol family from Fort-Coulonge showed interest in purchasing the building with the street numbers 15 and 17 on Daniel-Johnson Street, but they wanted to acquire shares in a company whose sole asset was the building they were interested in; apparently, this was to avoid the transfer taxes.
(c) To meet the purchasers’ requirements, on November 20, 2003, Les Entreprises de construction Tremesco Inc. transferred ownership of the building to 6154301 Canada Inc., a company incorporated on October 28, 2003, under the
Canada Business Corporations Act and wholly owned by Les Entreprises de construction Tremesco Inc. The sale was for $1 and other good and valuable consideration, including assuming the loan granted by the Toronto Dominion Bank in the initial amount of $467,425 and guaranteed by a hypothec on the building. In the deed of sale giving effect to this transfer to 6154301 Canada Inc., there is no mention of a consideration in the form of shares or of a rollover under section 85 of the Act.
(d) As the Toronto Dominion Bank refused to finance the acquisition of shares in 6154301 Canada Inc. by members of the Sauriol family, they acquired the building on December 3, 2003, for $745,000.00 paid on purchase.
(e) On December 8, 2003, the appellant acquired from Les Entreprises de construction Tremesco Inc. the 100 class A common shares of 6154301 Canada Inc. for $100 when the latter’s liquid assets were $277,574, that is, $745,000 from the sale of the building minus the amount of the hypothec on the building, which was $467,425.
The parties agreed that the only issue before the court was whether the appellant`s 2003 taxation year was statute-barred. The appellant raised a number of arguments why the taxation year was statute-barred:
[10] According to counsel for the appellant, the appellant did not make a misrepresentation that is attributable to neglect, carelessness or wilful default by not reporting the value of the benefit he received from Les Entreprises de construction Tremesco Inc., for the following reasons:
(a) The law is not clear; counsel said that she could not find any case law in which section 15 of the Act was used to find that a taxable benefit was received on the sale by a company of shares of a subsidiary to one of the company’s shareholders.
(b) The appellant did not personally have access to the funds held by 6154301 Canada Inc., aside from a director’s bonus of $21,750.
(c) The appellant will have to pay taxes on the profit he will earn upon resale of the shares.
(d) The value of the shares in 6154301 Canada Inc., as determined by the Minister, does not take into consideration the underlying taxes that are payable by 6154301 Canada Inc. following the sale of the building to members of the Sauriol family.
The court rejected each of these arguments:
[13] Contrary to counsel for the appellant’s contention at the hearing, there is at least one case involving a sale of shares that was considered as conferring a shareholder benefit. It is the decision by the Tax Review Board in
No. 513 v. M.N.R., 58 DTC 301. In that case, the appellant and his brother were the sole shareholders of company G, which, in 1941, had acquired from the appellant and related persons 458 shares in company X, a private corporation, for $151 per share. A few years later, in 1953, G required funds to finance its expansion projects. To obtain additional funds, G sold the 458 shares in X to the appellant for the same price as it had paid, $151 per share, which the appellant believed was the fair market value of the shares at that time. The Minister did not agree with that valuation and believed the value of the shares in 1953 was actually $220 per share. The Minister then assessed the appellant for a shareholder benefit of $31,000. In
No. 513, the existence of a shareholder benefit was not challenged, since the purpose of the proceeding was to determine the value of the 458 shares that were the object of the transaction.
[14] In the present case as well, the question of the value of the benefit arises because the Minister did not take into account the underlying taxes payable by 6154301 Canada Inc. following the sale of the building to members of the Sauriol family. Regardless of what the actual value of the benefit conferred on him might be, the appellant did not report anything in his 2003 tax return. In fact, 6154301 Canada Inc. never paid the taxes resulting from the sale of the building because it was dissolved on January 11, 2007, two and a half years before it was assessed for that transaction on August 26, 2009.
[15] Counsel for the appellant’s argument that subsection 15(1) of the Act cannot apply in this case because the appellant did not personally have access to the funds held by 6154301 Canada Inc. does not alter the fact that the appellant received a benefit from Les Entreprises de construction Tremesco Inc. Access to the funds is not a condition for the application of subsection 15(1) of the Act. Be that as it may, I believe that the appellant did have access to 6154301 Canada Inc.’s funds since he received a $21,750 bonus as the company’s director, had advances totalling $14,999 made to him, and had a $192,000 loan made to 6210929 Canada Inc., another company of which he was a shareholder.
[16] The other argument by counsel for the appellant, namely that subsection 15(1) of the Act should not apply to the transaction because the appellant will have to pay taxes on the gain he will realize on the resale of the shares, is not valid since subsection 52(1) of the Act allows an increase in the cost of property (in this case, the shares in 6154301 Canada Inc.) where the taxpayer, in computing the taxpayer’s income for a taxation year throughout which the taxpayer was resident in Canada, must add an amount in respect of the value of the property other than under section 7 of the Act. On application of subsection 15(1) of the Act, the appellant’s adjusted cost base of the shares in 6154301 Canada Inc. was increased by the amount in respect of the value of the property that was included in computing his income for 2003.
In the result the court concluded that the appellant`s 2003 taxation year was not statute-barred.
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