Employees of Opco received Opco shares as incentives under an Opco employee share ownership plan ("ESOP"). Under the terms of the ESOP, on retirement or other termination of employment, the employees would be required to dispose of these shares. To facilitate the disposition of such shares on retirement or other termination, Opco incorporates another corporation ("Buyco"), and Buyco purchase the departing employee's Opco shares. CRA stated:
[G]iven the degree of accommodation provided by Buyco to the departing employees and the parties' lack of separate interests, the better view is that the employees and Buyco are generally not dealing at arm's length. This view is consistent with several of our published documents (2007-0243171C6, 2002-0166655, and 2004-0103061E5) as well as the jurisprudence (Petro-Canada v. The Queen (2003 DTC 94) (confirmed by the Federal Court of Appeal (2004 DTC 6329)) and RMM Canadian Enterprises Inc. et al. v. The Queen (97 DTC 302)). Accordingly, in ruling requests on this type of transaction, considered in 2012, we refused to confirm that section 84.1 would not apply to deem employees to receive a dividend from a Buyco on the disposition of their Opco shares.