In order to generate refundable investment tax credits for research and development expenditures, a Canadian public corporation ("Lyrtech") transferred its R&D operations to the taxpayer, which was intended to qualify as a Canadian-controlled private corporation. The taxpayer initially was financed through debt owing to a discretionary trust which also held it shares. The trust's trustees were two individuals, one of whom was the president and a director of Lyrtech, of the other trust beneficiaries and of the taxpayer, and the other of whom was a director of such companies and a co-founder of Lyrtech. The trust's capital beneficiaries were various subsidiaries of Lyrtech.
After finding that the taxpayer was controlled de facto by Lyrtech, Favreau J went on to indicate that the contingent right of subsidiaries of Lyrtech to receive a distribution of the shares of the taxpayer qua discretionary beneficiary did not cause the taxpayer to be deemed to be controlled de jure by any of those subsidiaries (and, thus, by Lyrthech). He stated (at para. 55-56):
[T]he nature of the beneficial interest of each beneficiary ... is too aleatory, uncertain or indirect to be a right to the appellant's shares under paragraph 251(5)(b). ...
I highly doubt that Parliament's intent was for subsection 248(25) to apply to paragraph 251(5)(b) because the concept of beneficial interest is far too broad in scope and much too vague for it to apply to the concept of de jure control for the purposes of the definition of "Canadian
I strongly doubt that the legislator intended that subsection 248(25) should apply to paragraph 251(5)(b) as the concept of beneficial right has a scope that is too expansive and nebulous for it to apply to the notion of legal control for purposes of the definition of "Canadian controlled private corporation."