The corporate taxpayer was held entirely by the two individual taxpayers, who were alleged by the Minister to have had it pay for renovations on their home and landscaping for a parent. They argued (citing Outerbridge and Smith) that these pleaded allegations did not establish a sufficient basis for assessments under s. 56(2) because the transferees were the renovation and landscaping contractors, and s. 56(2) can only apply where the benefits conferred are not taxable in the hands of the transferee. Jorré J. rejected this argument. The Outerbridge and Smith doctrine applied only where s. 56(2) otherwise would be applied to include a taxable benefit that had already been included in the income of the actual recipient of the taxable benefit (para. 46), and did not apply (para. 41):
[w]here the recipient of the payment or the transferred property is simply receiving payment in return for adequate consideration (the supply of goods or services)... .