dividend

A payment received by the taxpayer that was stated to be made out of "paid-in capital and paid-in surplus" pursuant to the provisions of the Wisconsin Business Corporations Act was found to be a dividend for purposes of the Act. Mr. Davis stated (at p. 585) that:

As the funds distributed by Marine Capital Corporation admittedly represented nothing more than premiums paid into the treasury on the purchase of shares at prices in excess of their par value of $1 per share, the share capital was neither disturbed nor impaired by the distribution of these funds.

A payment received by the taxpayer that was stated to be made out of "paid-in capital and paid-in surplus" pursuant to the provisions of the Wisconsin Business Corporations Act was found to be a dividend for purposes of the Act. Mr. Davis stated (at p. 585) that:

As the funds distributed by Marine Capital Corporation admittedly represented nothing more than premiums paid into the treasury on the purchase of shares at prices in excess of their par value of $1 per share, the share capital was neither disturbed nor impaired by the distribution of these funds.

Under a reorganization, the Canadian-resident taxpayer received, in exchange for shares he previously held of Tyco International Ltd. (a non-resident corporation), one share of each of two new corporations and one new share of Tyco International Ltd. The Minister assessed on the basis that the receipt of the shares of the two new corporations represented a dividend to the taxpayer. In finding that the taxpayer had not received a dividend, Bowie, J. noted that the shares of the two new corporations were never owned by Tyco International Ltd.

The income which is typically earned by shares is dividends. A payment on shares that was of an unusual and unexpected kind, i.e., a voluntary payment by the company to avoid a possible complaint by the shareholders about the sale of part of the company's assets, was not income from those shares to the shareholders.

At 5053:

"[M]any of the amounts that would fall under section [15(1)] would not fall within the concept of 'dividend' in its ordinary sense in this context, which, as I conceive it, is 'sum payable ... as profit of joint-stock company' even though it were accepted that the term applies to a division of profits otherwise than in the manner required by the governing company law."

In order to minimize German corporate tax payable by its German subsidiary ("GmbH"), the taxpayer "Plc"), which was a UK company, formed a silent partnership (stille gesellschaft) with GmbH, which entitled it to annually receive most of the profits of Gmbh.

Before finding that a distribution in kind by a Bermudan corporation ("Tyco") was a taxable dividend to the taxpayer under s. 90, Rip CJ quoted with approval (at para. 13) the statement in Special Risks that a dividend is:

any distribution by a corporation of its income or capital gains made pro rata among its shareholders.