Filion – Court of Quebec finds that an office holder received no taxable benefit from improper expense charges which were docked from his compensation early the next year
In 1998, a deputy got the National Assembly of Quebec to pay $23,000 in expenses which supposedly were expenses of his constituency office, but which were later established to be in significant part of a personal nature (leading to his imprisonment for fraud in 2004). The National Assembly got wind of this impropriety in January 1999, and stopped payment on a taxable transitional allowance of $53,000, that was payable to him in connection with his defeat in the election. In 2013, the Quebec Superior Court effectively found that the taxpayer was entitled to the excess of the $53,000 transitional allowance over the $23,000 which he had largely misappropriated.
Tremblay JCQ found that there was no taxable benefit at all to the taxpayer in 1998 in light of the more-than-offsetting seizure that occurred in January1999, stating:
The correspondence between the misappropriation of funds and the appropriation of the transitional allowance by the Office of the National Assembly prevents the plaintiff's economic situation being considered to have been truly altered in 1998 to his benefit as a result of his misappropriation.
The National Assembly did indeed pay out sums to third parties on the basis of misrepresentations … from the plaintiff, but it recompensed itself through set-off in the first days of 1999.
At the time the plaintiff filed his return in April 1999 for his 1998 taxation year, he did not retain a taxable benefit resulting from his [mis]conduct … .
Neal Armstrong. Summary of Filion v. Agence du revenu du Québec, 2020 QCCQ 3024 under s. 6(1)(a).