Tax court rules no mark-up on shareholder work results in taxable benefit

The Tax Court of Canada ruled that a house construction company's decision not to charge a mark-up on the costs incurred for shareholder work resulted in a taxable benefit.

The sole shareholder of a home construction company oversaw the building of his own residence and repaid the company for all third-party expenses incurred in the process.

However, the judge upheld the CRA's assessment that a taxable shareholder benefit had been received.

The benefit was calculated by applying the company's average profit margin of 8.09% on its other construction projects that year to the costs incurred on the shareholder's personal residence.

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