In 101139810 Saskatchewan Ltd. v R, 2017 TCC 3, an individual owned all of the shares of DC, which held some shares of Targetco. The individual undertook a series of transactions that ended with the sale of Targetco shares to an arm’s length purchaser. The series included a divisive reorganization in which DC spun-off its shares in Targetco to TC1 and TC2, both of which were wholly-owned by the individual. The individual then sold TC1 and TC2 to the arm’s length purchaser. The CRA reassessed the dividends received by TC1 and TC2 as capital gains under 55(2). The court dismissed the appeal. 55(2) applied even though the individual realized a gain on the sale of the TC1 and TC2 shares equal to the deemed gain under 55(2). This was not double taxation because the same taxpayers were not subject to tax twice on the same capital gain. Kenneth Keung “Capital Gains Taxed Twice” Tax for the Owner-Manager 17:2 (April 2017)
