The taxpayer, a family trust, made a non-arm's-length sale of shares to a numbered corporation for a promissory note of approximately $2.6 million. The numbered corporation then immediately sold the shares at arm's length to a third party ("Keolis") for approximately $2.8 million. The lower sale price on the first transfer reflected that it had been determined that 404 would bear the cost of professional fees, relating to the structuring of the sale to Keolis, of $233,786. In finding that the $233,786 was a deemed dividend received by the taxpayer by operation of s. 84.1(1)(b), Archambault J. noted that the subsequent sale to the outside party clearly established a fair market value of approximately $2.8 million for the shares, and that it would be very strange for the taxpayer to have disposed of the shares for the lowered price if it had not also received the benefit of the fee payments as additional consideration (TCC para. 14).
In the Court of Appeal, Noël JA noted the taxpayer's argument that the Minister was statute-barred from applying s. 69(1)(b) to deem the sale of the shares of the numbered company to have been made for the shares' fair market value of $2.8 million, stating (at FCA para. 17):
[I]t was neither necessary nor useful to rely on paragraph 69(1)(b), since the value of this consideration tallies with the price at which the shares were sold by [the numbered company] as part of the arm's length transaction that took place the same day and is therefore their fair market value.