http://decision.tcc-cci.gc.ca/tcc-cci/decisions/en/item/108836/index.do 
Charania v. The Queen (March 30, 2015 – 2015 TCC 80, V.A. Miller J.).
Précis: The issue in this decision was whether the taxpayer received a benefit in 2009 in the amount of $79,779 from B&N Transmission Inc. (“B&N”), a corporation of which he was a shareholder. The benefit allegedly arose from the transfer of a piece of real estate to him at the corporation’s book value. The Court accepted the evidence of the taxpayer and the accountant for B&N that the transfer at book value was an error; the transfer should have been recorded at fair market value. The appeal was therefore allowed.
Decision: The facts in this case were essentially straight forward:
[4] B&N purchased the Property on April 4, 2003 and it was on title to the Property. The purchase price was $198,023.33. B&N paid the deposit on the Property and gave a mortgage to the Bank of Montreal in exchange for proceeds of $150,000.
[5] The Appellant lived in the Property and paid $1,200 monthly to B&N from April 4, 2003 until 2009. B&N reported this amount as rent, claimed the expenses for the utilities and municipal tax incurred with the Property and claimed capital cost allowance (“CCA”) on the Property.
[6] On March 9, 2009, B&N transferred the Property to the Appellant. According to the Land Registry document, the consideration given for the transfer was $1.
[7] On April 15, 2009, the Appellant signed an Agreement of Purchase and Sale with third party purchasers to sell the Property for $275,000. The sale closed on June 30, 2009.
[8] In 2009, the Appellant was both an employee and a shareholder of B&N which is a small family run business.
The appellant had been under the impression that he beneficially owned the property all along:
[24] The Appellant stated that when he moved from his uncle’s home in 1996, he bought a house on Upper Dwyer Hill Road. His marriage ended in 1998 and he settled financial matters with his former spouse. He then sold his house on Upper Dwyer Hill Road. He received approximately $138,548 from the sale of this house and he placed this money in B&N because he feared that his former spouse would ask for further amounts for support.
[25] On November 7, 2002, the Appellant and B&N signed a Declaration of Trust in which they declared that B&N would hold the Property in trust for the Appellant.
[26] The Appellant stated that the Declaration of Trust was explained to him and he understood that the Property was really his. It was his belief that the monthly amounts he paid to B&N were not rent but were mortgage payments. He stated that when the Property was purchased, B&N paid a deposit of $60,000. He did not think that the deposit was part of the funds he had deposited with B&N.
[27] The Appellant stated that in 2009, he and his then girlfriend wanted to purchase a home together. He wanted the Property transferred to him so that he could sell it because he was told that he could get a lower interest rate on his mortgage if he personally sold the Property instead of having B&N sell it.
Unfortunately the Declaration of Trust proved to be ineffective. Mr. Koshy, the accountant for B&N, conceded that the problem arose from his firm’s error and the property should have been transferred to the appellant in 2009 at fair market value:
[29] The Appellant’s representative conceded that B&N did not comply with the conditions in the Declaration of Trust. Consequently, the Appellant was not the beneficial owner of the Property.
[30] It appears from the evidence that B&N appropriated the Property for itself. B&N was on title for the Property and it held a mortgage on the Property. It recorded the Property as a capital asset and claimed CCA on it. B&N recorded the Appellant’s payments to it as rent. All of the utilities and the municipal tax bills were in B&N’s name and it paid all of these expenses.
[31] The Appellant stated that he paid $1,200 monthly to B&N. It was his opinion that he was paying the mortgage and monthly expenses for the Property. However, I gather he never enquired about any of the costs involved in maintaining the Property because the monthly mortgage payments alone were approximately $1,200.
[32] Both the Appellant and Nimira Charania [the appellant’s aunt and the bookkeeper for B&N] stated that in 1998 the Appellant deposited $138,548 into B&N for safe keeping. The Appellant stated that he did not sign an agreement or any documents with B&N with respect to this amount.
[33] Mr. Koshy argued that his firm made an error when it recorded the transfer of the Property at net book value instead of the fair market value. I have concluded that he is correct and this issue was the result of an error made by his firm.
As a result the appeal was allowed, subject to a proviso that the appellant’s shareholder account should be adjusted accordingly:
[43] The appeal is allowed and the reassessment dated November 13, 2012 is referred back to the Minister of National Revenue for reconsideration and reassessment on the basis that the amount of $79,779 is to be deleted from the Appellant’s income for the 2009 taxation year. It is of course understood by my decision that Nimira Charania must cause B&N to increase the Appellant’s shareholder loan account in B&N accordingly.