Hrga v. Canada
T-2249-90 / T-2252-90 / T-2759-90
Jerome A.C.J.
6/2/97
5 pp.
Whether plaintiff appropriated, to his benefit, property of Interconserv Inc. and, if so, whether value of benefit should have been included in computation of income for 1986, 1987 taxation years under Income Tax Act, s. 15(1)-Plaintiff sole beneficial shareholder of Interconserv-Under debenture, Concept Marketing Services Inc. covenanted to pay Victoria & Grey Trust Company $350,000 loaned to Concept-Plaintiff signed debenture as guarantor, called upon to honour guarantee-Transaction not included in calculation of plaintiff's income-Money paid by Interconserv to plaintiff considered by defendant to be funds or property appropriated to taxpayer in 1986, 1987 taxation years-M.N.R. including in plaintiff's income sum of $145,698 (related to guarantee) and $3,813 (being the amount paid in legal fees in relation to guarantee)-Plaintiff appealing Minister's decision on basis that did not receive personal benefit from transaction, Minister misapplied s. 15-S. 15 requiring two things: benefit to taxpayer, intentional taking-Plaintiff could do no worse than break even, did not stand to make benefit-Plaintiff's explanation reasonable, credible-Although personally liable as guarantor for Concept loan, plaintiff had independent right to be indemnified on basis of agreement with Interconserv-As sole director and operating mind of Interconserv, plaintiff authorized to make decision on behalf of Interconserv pertaining to indemnity agreement-Appeal allowed-Income Tax Act, S.C. 1970-7172, c. 63, s. 15(1) (as am. by S.C. 1977-78, c. 1, s. 8(2)).