The taxpayers agreed with a corporation controlled by them to transfer an apartment building to the corporation in consideration for the issuance of preference shares. However, at the time of the agreement, the authorized capital of the corporation did not include preference shares, and this deficiency was not rectified until well after the taxation year of the taxpayers in question.
In rejecting the submission of the Crown that the shares had to be validly issued in the year of the transfer of the building, Bowman J. found (at p. 1110) that the expression "consideration that includes shares" was not confined to executed consideration, and that:
What is essential is that there be either an actual issuance of shares or a binding obligation to do so at the time of transfer and that the shares be issued within a period of time that, in all the circumstances, is reasonable. ... Consideration is of two kinds - executed and executory - and it would be an unwarranted restriction on that term to limit it to only one of the two types [citing Chitty on Contracts on the meaning of "consideration"].
Accordingly, an election under s. 85(1) in respect of the transfer of the apartment building was effective, notwithstanding that a purported issuance of preference shares at the time was not validated until a subsequent date.