As part of a reorganization relating to the sale of a share investment in Bco by Aco (a specified financial institution), a partnership of which Aco was a member received dividends on term preferred shares of Gco. Regarding whether the exception for dividends not received in the ordinary course of the business applied, the Directorate first noted that it was its position that in the s. 112 context, a corporate member of a partnership receives a dividend paid to the partnership to the extent of its share thereof. The Directorate then stated:
In this case, Aco as a venture capital corporation is not a passive investor. … [W]hen the time is right, Aco realizes its investments and profits from them. … [T]hese facts alone demonstrate that generally Aco's share acquisitions would be made in the ordinary course of business of the corporation it operates. …
… Gco was only formed to be used in the process of disposing of Aco's interest (via XXXXXXXXXX) in the capital stock of Bco. Consequently, we are of the view that in order to conclude that the shares of the capital stock of Gco were acquired in the ordinary course of business of the business carried on by Aco, it must be shown that Aco acquired the shares of the capital stock of Bco in the ordinary course of business of the business it carried on.
Such a demonstration requires a comparative analysis of the investments Aco has made in the ordinary course of its business over the years in order to identify what is ordinary and what is exceptional. For example, the circumstances that ordinarily surround share acquisitions, Aco's conduct and involvement in the management of the businesses, the business relationships with the managers and corporations, the manner in which the shares are acquired and held, the source of the funds invested, the length of time the shares have been held, the field of activity of the businesses, and any other relevant factors could form part of such an analysis. In addition, it should be determined whether Aco's conduct in relation to its investment in Bco is similar and analogous to its conduct in relation to its other investments. To the extent that, based on such an analysis, it was demonstrated that Aco's investment in Bco was not exceptional in relation to its other investments, we would be of the view that the shares of the capital stock of Gco would have been acquired in the ordinary course of the business carried on by Aco and/or XXXXXXXXXX and that subsection 112(2.1) would apply … .