Two individuals (X and Y) each held all of the shares of Gesco and Holdco, respectively, and each of Gesco and Holdco held ½ of all the shares (being 50 common shares each) of Opco.
CRA rejected a submission that each of Gesco and Holdco was deemed by s. 256(1.4)(a) to hold an additional 50 common shares of Opco, or 100 out of 200 common shares, so that neither was associated with Opco. Instead, each of X and Gesco (and Y and Holdco) controlled Opco, so that Gesco and Opco (and Holdco and Opco) were associated with each other under s. 256(1)(a) or 256(1)(b). CRA stated:
[T]he presumption in paragraph 256(1.4)(a) that shares are deemed to be issued and outstanding is relevant only in respect of new unissued and outstanding shares to which persons would be entitled, not in respect of shares already issued and outstanding.