Peter K.S. Wu v. The Queen
96 DTC 3276
Tax Court of Canada (Informal Procedure)
September 3, 1996
(Court File No. 96-7(IT)I.)
Inclusions in income — Shareholder’s benefit — Taxpayer’s wife N a medical practitioner and taxpayer a practising C.G.A. — Taxpayer incorporating N Inc. on N’s instructions — N owning the one Class A common (voting) share and all of the Class C Preferred shares of N Inc. — Taxpayer, N, and a trust for their children each owning Class B non-voting common shares — During 1990, 1991, and 1992, N Inc. declaring stock dividends on Class B shares in the form of Class D preference shares, and N Inc. redeeming only the trust’s Class D preference shares immediately — Value of N’s Class A common share accordingly reduced by an amount equal to the redemption price of the said Class D preference shares, including the unredeemed ones still outstanding in the taxpayer’s and N’s hands — Such redemption price on taxpayer’s Class D preference shares accordingly included by Minister in taxpayer’s income as a shareholder’s benefit under subsection 15(1.1) I.T.A. — On the evidence, however, “one of the purposes” of the Class B preference share stock dividends (in the form of Class D preference shares) not necessarily to significantly alter the value of N’s Class A common share — Taxpayer accordingly not falling within the purview of subsection?15(1.1) I.T.A. — Minister thus ordered to reassess, deleting the stock dividends in issue from his incomes for 1990 to 1992 — I.T.A. ss. 15(1.1), and 55(2).
DOMINION TAX CASES
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