Words and Phrases - "transferred property"

a
91
b
44
c
87
d
57
e
43
f
32
g
20
h
15
i
77
j
2
k
3
l
32
m
62
n
29
o
41
p
83
q
3
r
78
s
96
t
48
u
16
v
11
w
24
y
2

Active Asset Management Inc. v. The King, 2024 TCC 87

Summary Under
Tax Topics - Income Tax Act - Section 160 - Subsection 160(1)
issuing promissory notes in satisfaction of dividends in kind does not entail a transfer of property

On December 1, 2004, the appellant (AAM), which held all the (Class A and B) shares of a private corporation (Bakorp) (i) resolved to increase the stated capital of the Class A Bakorp shares by $35 million (resulting in a deemed dividend in that amount) and (ii) received two promissory notes aggregating $77.6 million in satisfaction of dividends declared on that date on the Class A and B shares.

In finding that none of these dividends constituted a transfer of property by Bakorp to AAM, so that s. 160(1) did not apply regarding an unpaid tax debt of Bakorp, Bocock J first stated, regarding the stated capital increase (at paras. 26-27):

AAM can now say its shares reflect a different stated value, but not a penny has been received by it as a consequence of the deemed dividend. …

[T]he mischief targeted by s.160, avoidance of payment of a tax debt to the Crown, has also not occurred. The “funds” available to Bakorp have not changed in the slightest. Its bank account, working capital, other assets and reserves have not been depleted in any way … .

Turning to the dividends-in-kind, he stated (at para. 35):

Where and how has Bakorp transferred, dissipated or surrendered control of its assets, funds or property to circumvent the payment of its tax liability.[citing Algoa] It has not in any way done so. No assets or funds of Bakorp, consequentially arising from the declaration of the declared dividends or making of the promissory notes, reside with AAM.

Words and Phrases
transferred property