After the individual shareholders ("Cox") of the taxpayer and a related corporation ("Greenstone") had entered into an agreement for the sale of Greenstone to a third party ("Dougan"), Greenstone transferred its non-logging assets to the taxpayer as redemption proceeds for shares of Greenstone held by the taxpayer. When the sale transaction with Dougan fell through, an agent, who for some time had been informally acting on behalf of Cox to find a buyer for Greenstone, identified another purchaser to whom the shares of Greenstone were sold some months later.
In finding that the deemed dividend arising on the share redemption occurred as part of the series of transactions resulting in the disposition of the Greenstone shares to the ultimate purchaser, Bowie J. stated (at pp. 620-1):
"... a change in the identity of the purchaser, where the intention to sell remained intact throughout and the hiatus is as short as this one, cannot divorce the share redemption from the subsequent sale of the Cox shares. .... To conclude that no nexus existed between the corporate reorganization and the redemption of the Greenstone shares in December or January and the sale of the Cox shares in February would be to ignore the obvious tax-avoidance purpose of subsection 55(2), as well as the words of subsection 248(10)."