McCague v R, 2025 TCC 59, is another section 160 case where 50/50 shareholders caused their corporation to pay them dividends at a time when it owed taxes. The Court held that section 160 applied and summarized the law in this area as follows:
[64] So, although the payment of a dividend on a 50-50 shareholding is not automatically one that is the result of a non-arm’s length transaction, it does remain a type of transaction that is more likely to attract scrutiny as one resulting from acting in concert. The question of what is needed to avoid that result is fact specific. In cases like Veilleux [2022 TCC 69] and in this case, the “diverging interests” between the shareholders are only the differing personal reasons for getting the dividends at the company, and this seems insufficient to avoid being tagged with the “acting in concert” label. There is no divergence between the shareholders as regards their common intent or their common interest.
The Court also considered whether the taxpayer was liable for the unremitted source deductions of another corporation of which he had been a director. The taxpayer, among other things, tried to argue he was not liable for the source deductions of individuals who had been independent contractors rather than employees. The Court expressed doubt about the relevance of the argument because the corporation had actually withheld, but not remitted, the source deductions in question. Liability might be found to flow from that fact even if the workers had been independent contractors (see ¶100).
See also the summary by M Wiwatowski Tax Topics no 2732 (June 3, 2025).
