Principal Issues: A corporation (Opco) is controlled by two individual shareholders (X and Y). Each of X and Y is the sole shareholder of another corporation. Opco builds condominiums and X and Y came to an agreement to the effect that Opco would sell one condominium unit to each corporation for POD that is less than the FMV of the condominiums units. 1) Whether subsection 69(1)(b) applies to Opco on the sale of the condominiums. 2) Should the value of the benefit be included in the income of X and Y?
Position: 1) Question of fact. 2) Since all the conditions in subsection 56(2) are met, a benefit may be included in the income of X and Y, the shareholders of Opco.
Reasons: 1) It is a question of fact whether persons not related to each other are, at a particular time, dealing with each other at arm’s length. 2) If the condominiums have been sold by Opco to X and Y instead of their respective corporation, a benefit under subsection 15(1) would be included in the income of X and Y respectively. Accordingly, since all the conditions of subsections 56(2) are met, a benefit may be included in the income of X and Y.