Bolduc – Quebec Court of Appeal applies the s. 246(1) equivalent to a benefit conferred by a partnership on the shareholder of a limited partner or of a business contractor

A limited partnership (“SEC”) sold condo units for less than their fair market value to (i) the daughter and wife of Mr. Migliara, the founder of SEC, (ii) the two daughters of Mr. Bolduc, the other founder of SEC, (iii) Mr. and Mrs. Lapolla, who were shareholders of one of the limited partners, which also acted as SEC’s sales agent, and (iv) Mr. Sponek, who was a shareholder of a business partner of SEC and was admitted to be a related person.

In addition to finding that the Quebec equivalent of ITA s. 69 applied to deem SEC to have received fair market value proceeds for the sales, and that the Quebec equivalent of ITA s. 56(2) applied to include a benefit in Mr. Migliara's income in respect of the sale to his spouse and daughter (given that inter alia that he was “the driving force behind the SEC”) the Court went on to find that these sales resulted in taxable benefits to all of the above-named individuals pursuant to s. TA 1082.1 (similar to ITA s. 246(1)(a)). The Court stated (at para. 32, TaxInterpretations translation):

The scope of analysis under TA section 1802.1 is broad. It applies when the person receiving the benefit is not a shareholder, director, or employee. As soon as a benefit is received and the amount of that benefit is not included elsewhere in computing the taxpayer's income, whereas it should have been if the payment had not been made indirectly, TA section 1802.1 applies.

The Court did not provide additional analysis, for example, as to why a direct payment by a partnership to the shareholder of a passive limited partner would otherwise have been taxable.

Neal Armstrong. Summaries of Bolduc v. Agence du revenu du Québec, 2025 QCCA 1470 under s. 69(1)(b), s. 56(2) and s. 246(1).