The two taxpayers, which were subject corporations, indirectly sold their investment in another public corporation ("ATCOR"). This was accomplished by their common shares of ATCOR being exchanged on the amalgamation of ATCOR with a newly incorporated subsidiary of a related corporation for Class A or B non-voting redeemable shares of the amalgamated corporation having a paid-up capital approximating the respective adjusted cost base of their ATCOR common shares, with the special shares then being redeemed. The Part IV tax payable on the deemed dividends arising on this redemption was refunded because of normal-course dividends paid by the taxpayers to their shareholders that year (and, in one case, the following year).
In finding that the subsequent normal course dividends were part of the same common law series of transactions as the amalgamation/redemption transactions, Rothstein, J.A. stated (at para. 67):
The facts that CU and CUH intended to use both the ATCOR/Forest transactions and the normal course dividends to achieve their tax avoidance objective, that they had the ability to ensure that all the transactions would occur, and that all the transactions did indeed occur as intended are sufficient to constitute them all part of a common law series for the purposes of subsection 55(2). It is of no consequence that one or more of the transactions had an independent purpose and existence.