The taxpayer and 53 other BC credit unions maintained their required deposit insurance with two corporations ("CUDIC" and "STAB"). Due to a change in regulations, they were required to approximately double their insurance with CUDIC. In order to indirectly accomplish a transfer of funds from STAB to CUDIC, STAB paid dividend B to the credit unions (as well as dividend A, whose tax-free status was not challenged), with the credit unions paying an assessment of CUDIC for further contributions in an equivalent amount. Dividend B reflected STAB's aggregate accumulated assessment income (which had been received by STAB free of tax under s. 137.1(2)).
The taxpayer was entitled to a deduction (under s. 137.1(11)(a)) for the fresh assessment paid to CUDIC. If it had received dividend B in proportion to the assessments previously paid to STAB, dividend B would have been included in its income. However, dividend B had instead been paid in proportion to the credits unions' relative shareholdings in STAB, so that it was received by the taxpayer and the other credit unions free of tax.
Trudel JA found no reviewable error in the findings of Boyle J that dividend B was declared primarily for a bona fide non-tax purpose, namely, to allow for the credit unions to pay CUDIC's extraordinary assessments, and that "choosing the method of transferring funds that would result in member credit unions paying the least amount of tax" was not an avoidance transaction as "'[t]he act of choosing or deciding between or among alternative available transactions or structures to accomplish a non-tax purpose, based in whole or in part upon the differing tax results of each, is not a transaction'" (para. 35, see also para. 63). She further noted (at para. 64) that "the reason a declaration of dividends was chosen was that it aligned more closely with the CUDIC assessments on an individual credit union basis than a return of assessments."