This case (Copthorne Holdings Ltd. v. Canada) is similar to the case being analyzed (Groupe Honco Inc. v. Her Majesty The Queen) in the fact that they both seem to be entering amalgamations in order to receive a tax free benefit. In Copthorne Holdings Ltd. v. Canada, the PUC of the previously known subsidiary became included in the PUC of the amalgamated corporation. In Groupe Honco Inc. v. Her Majesty The Queen, the capital dividend account of Old Supervac transferred to the amalgamated corporation New Supervac. In order to receive tax free benefits, the parent and subsidiary corporations in Copthorne Holdings became sister corporations prior to amalgamation in order to have a larger PUC. When shares were redeemed and a payout occurred to the non-resident shareholder, it was much larger than it would have been had the subsidiary PUC been cancelled upon amalgamation. In the Groupe Honco case, the acquirers of the Old Supervac claimed to have no knowledge of the capital dividend account. When the CDA came to light, they then tried to pay out a capital dividend from New Supervac to Groupe Honco who then paid a capital dividend to Gestion Paul Lacasse. In both situations the parties are disobeying the anti-avoidance rule.
We can use the conclusion from this case to state that the acquisition of Old Supervac’s shares and declaration of a capital dividend form a part of the same series of transactions. When deciding to elect the dividend being declared as a capital dividend,