Sedona Networks Corporation v. The Queen, 2006 DTC 2486, 2006 TCC 80 -- summary under Paragraph 251(5)(b)

Paragraph 251(5)(b), which deemed a shareholder to be in the same position in relation to control of a corporation as if the shareholder owned shares that were subject to options, did not have the effect of deeming such optioned shares to be owned by the shareholder for purposes of the definition of "Canadian-controlled private corporation" in light of the contrast with the wording of subsection 256(1.4), which deems the option holder to own the optioned shares. In any event, paragraph 251(5)(b) did not deem the actual owner of the shares (in respect of which option rights have been transferred to somebody else) to have ceased to own those shares or to have ceased to control the target corporation. Accordingly, Archambault J. rejected a submission of the taxpayer's counsel that shares owned by a subsidiary of a public corporation should not be considered to be treated as shares that tainted the corporation's mooted status as a CCPC because the right to control the voting rights of those shares had been transferred to a Canadian-resident non-public corporation for a six-year period.