An individual shareholder of a corporation ("B&N") thought that he was the beneficial owner of his home, but everyone else, including his accountants (and ultimately the Tax Court) considered that it was beneficially owned by B&N. Immediately before his sale of the home at a gain, it was transferred to him by B&N, with the excess of its book value over the outstanding mortgage amount being treated as a shareholder advance to him.
In reversing a shareholder benefit assessment of the taxpayer equal to the excess of the property's fair market value over its book value (and stating an "understanding" that the shareholder loan amount would be increased by this difference), VA Miller J stated (at paras. 40-41):
The Appellant was not aware of the error in this case nor did he sanction the error. He believed that the Declaration of Trust was followed and that he already owned the Property.
It is clear that B&N did not intend to confer a benefit on the Appellant. It transferred the Property to him and included an amount with respect to the Property as a loan receivable from him. The problem was that the amount included was incorrect. This problem arose as a result of an error made by [the accountants] not from any intent of B&N or the Appellant to commit a fraud.