Unrelated individuals (Mr. X and Mr. Y) each holding 50% of the shares of Holdco Inc. (which wholly-owns Opco Inc.) subscribe equally for special voting non-participating shares of Opco Inc., so that they hold more than 50% of the voting rights. Opco Inc. transfers a building and land on a s. 85(1)) rollover basis for redeemable "Rollover Shares" of Holdco Inc., which are then redeemed so as to generate a s. 84(3) dividend to Opco Inc. and Opco Inc.
In finding that s. 55(2) would apply to the deemed dividend, CRA stated:
[T[he event described in subparagraph 55(3)(a)(ii) occurred because there was a substantial increase in the total direct interest in Opco Inc. of Mr. X and Mr. Y, who are "unrelated persons" within the meaning of paragraph 55(3.01)(a), immediately before the time of that increase in interest in Opco Inc.