S. 149.1 of the Quebec Cooperatives Act provided that certain cooperatives could set up an “enhancement reserve” to value the use of the cooperative's services, s. 149.2 contemplated that such reserve could be allotted in the form of rebates to the persons or partnerships who ceased to be members or auxiliary members of the cooperative following their resignation or otherwise, and s. 149.4 contemplated that such rebates would be allocated in proportion to the business done by those persons or partnerships with the cooperative or with business corporations or partnerships in which the cooperative held shares or units.
After noting that s. 18(1)(e) prohibited the deduction of the reserve, CRA addressed the question whether a cooperative may deduct amounts it pays as patronage dividends pursuant to ss. 149.2 and 149.4, by indicating that this was a question of fact.