CRA finds that shares with a formula entitlement to corporate profits are taxable preferred shares.

CRA concluded that shares which were entitled to 75% of the profit resulting from an adventure in the nature of trade were taxable preferred shares on the basis that there was thus a limitation (to a maximum) of the amount of dividends to which they were entitled.  This conclusion, although consistent with prior positions, is questionable, as such shares obviously were participating shares from any realistic perspective.

Neal Armstrong.  Summary of 15 March 2012 T.I. 2012-0443471E5 under s. 248(1) – taxable preferred share.