A corporation owned by the taxpayer and his family built a luxurious home in 1978 at a cost of $395,549 on land which originally had been acquired by it for a housing development which the municipal authorities had failed to approve. The taxpayer was reassessed on the basis that he had received a benefit computed by taking a 9% rate of return on the corporation's equity in the house (i.e., the cost of construction minus the amount of a third-party mortgage), adding thereto the mortgage interest and other expenses paid by the corporation, and subtracting the monthly rent of $1,100 paid by the taxpayer.
Pratte, J.A. accepted this computation of the benefit, with the proviso that it should be reduced by an amount of notional interest on an interest-free loan which the taxpayer had made to the corporation in order to help fund the construction, given that if the taxpayer had been dealing with a corporation of which he was not a shareholder, this interest-free loan would have been taken into account in determining the amount of the rent. Although the value of the benefit which was received, rather than the cost of the benefit to the corporation was relevant test, "in determining the value of benefit, one may take its cost into consideration" (p. 6325). Here, the high cost of the home was attributable to the special requirements of the taxpayer, and under such circumstances a corporation of which the taxpayer was not a shareholder "would have then charged a rent sufficient to produce a decent return on its investment" (p. 6326).