Penny v. Canada
T-1051-91
Simpson J.
7/12/94
10 pp.
Appeal from decision of Tax Court of Canada as to whether taxpayer, as shareholder of company, appropriated to himself account receivable payable to company-If so, amount or value of asset to be included in computation of income for 1981 under Income Tax Act, s. 15(1)(b)-From 1974 to 1979, taxpayer principal shareholder of Canada Tube Company Limited (Canada Tube)-Sold 50% interest to partner in 1979-Commission sales agreement entered into between Canada Tube and Bolton Steel Sales Ltd. (Bolton Sales)-Taxpayer, Bolton Sales "synonymous"-By April 13, 1981, Canada Tube owing Bolton Sales commissions in amount of $336,684.96 (Bolton Sales Receivable)-Taxpayer acquiring Canada Tube's assets-New company incorporated as Bolton Steel Tube Co. Ltd. (Bolton Tube)-Sole purchaser of Canada Tube's assets-Boston Sales Receivable shown in number of documents as payable to taxpayer personally-Appropriation of Bolton Sales Receivable by taxpayer under s. 15 occurred as of April 13, 1981 as alleged by Minister-Not result of alleged accounting error-Taxpayer, legal advisor treating Bolton Sales Receivable as amount to be paid to taxpayer-Word "appropriation" in s. 15(1)(b) requiring intention, cannot be inadvertent-Relevant documents stating repeatedly Bolton Sales Receivable payable to taxpayer-Taxpayer aware Bolton Sales Receivable payable to him-That such asset could not have been realized in 1981 not bar to appropriation-Appropriated property need not be cash or be capable of being converted into cash-As long as shareholder derives benefit, legality of appropriation matters not-Bolton Sales Receivable undoubtedly appropriated for taxpayer's benefit-Interest paid to him in 1981 by Bolton Tube on amount of Bolton Sales Receivable-Appeal dismissed-Income Tax Act, S.C. 1970-71-72, c. 63, s. 15(1) (as am. by S.C. 1977-78, c. 1, s. 8(1), (2)).