The taxpayer was the sole trustee of the family trust that, by utilizing his services, provided management services to corporations in which the trust had direct or indirect interests. Preferred beneficiary elections were made by the trust to allocate the income of the trust to the two income beneficiaries (who were children of the taxpayer).
After stating (at p. 1569) that "in the absence of sham, there is nothing in law to prevent an individual from agreeing to provide his professional or management services to a client through the medium of a corporation or some other third party entity like a trust", Mogan TCJ. found that s. 56(2) did not apply to include the management fees in the income of the taxpayer because that income was taxable in the hands of the income beneficiaries.