The taxpayer had been a director of corporation ("Canam") which had been struck from the corporate registry. Unaware of Canam's dissolution, CIBC maintained a corporate account for Canam, over which the taxpayer had sole signing authority. The taxpayer deposited a fraudulently altered cheque into the account in the amount of $350,000, and $118,000 of the money disbursed was not later recovered by CIBC. It was unclear whether the fraud had been perpetrated by the taxpayer or by an associate, Mr. Craine, who died before a proper investigation could be conducted. Hogan J. found that s. 56(2) did not attribute as income to the taxpayer the $102,000 portion of the $118,000 that the taxpayer disbursed for the benefit of Mr. Craine. He stated (at para. 49):
The funds never belonged to Canam. Caman's bank account was simply used as an instrument to perpetrate the fraud against the CIBC. ... A corporate asset was not transferred by Canam to Mr. Craine on the direction of the Appellant. The evidence suggests that both men participated in the scheme.