Société d’Investissement Desjardins v. Minister of National Revenue, 91 DTC 393, [1991] 1 CTC 2214 (TCC) -- summary under Subsection 112(2.1)

The taxpayer, which was a venture capital corporation, was found not to have received a deemed dividend on a term preferred share in the ordinary course of the business carried on by it. The term preferred shares, which were held by the taxpayer for only nine days before their redemption, were not acquired in accordance with the taxpayer's investment philosophy, which was to acquire medium- and long-term investments. Instead, they were acquired as part of an arrangement to maintain the taxpayer's voting interest in the corporation notwithstanding the issuance of voting shares to employees. Tremblay J. also noted that s. 112(2.1) "was clearly enacted to avoid the improper use by lending institutions of shares similar to loans the dividends on which were tax-free while the interest on such loan had to be included in the income of these corporations", whereas here no such abuse was intended by the taxpayer (p. 410).