Ms. Chaplin appealed to the Tax Court of Canada. One of her main arguments was that she paid the legal fees personally and that the corporation Triventa did not. Basically, she argued that the corporation’s alleged payment of those fees, and therefore the credit to her shareholder loan account, were erroneously recorded.
The Tax Court agreed. Although the facts were quite complex, the Tax Court judge found no evidence that Triventa paid the fees. To the contrary, all of the relevant evidence showed that the taxpayer paid the fees. The judge concluded: “Based on all of the foregoing, I find that there was no loan made by Ms. Chaplin to Triventa to pay the Legal Expenses. The bookkeeping entry by which the purported loan was created was a complete fiction.” Ms. Chaplin won the appeal.