The taxpayer was the sole shareholder, and he and his wife were the only regular employees, of a corporation engaged in a packaging business. He maintained that he received an interest-free loan of approximately $1,000,000 from the corporation, in order to enable him to acquire a new residence as described in s. 15(2.4)(b), in his capacity as an employee rather than a shareholder, and that s. 15(2.4)(e) did not apply. The loan was required to be repaid over 10 years at the rate of at least $50,000 per year, the sums were advanced as construction work on the residence occurred, and the corporation had no security interest in the housing property.
Angers J dismissed the taxpayer's appeal. He adopted a requirement in 2011-0406271E5 (similar to IT-119R4, para. 11) that the taxpayer establish that a loan might be made on similar terms to a non-shareholding employee. No evidence was adduced to establish this. Instead, the loan terms were inconsistent with what would be available to a mere employee - as it represented a substantial portion of the corporation's retained earnings, and was unsecured. The loan also was labeled as a shareholder advance in the corporation's accounts. Furthermore, the "very flexible" repayment conditions (para. 29) did not represent bona fide repayment arrangements as required by s. 15(2.4)(f).