MacDonald - Federal Court of Appeal affirms breadth of "in any manner whatever" in s. 84(2) anti-stripping rule

In a surplus-stripping transaction, a New Brunswick doctor sold a cash-rich corporation to his brother-in-law for a promissory note, with his resulting capital gain sheltered by unrelated capital losses - and with his brother-in-law extracting the corporate funds following a transfer of the corporation to a Newco he owned, and then paying off the promissory note.

Reversing the trial judge, Near JA found that s. 84(2) applied to treat the amounts the doctor received as a taxable dividend rather than a capital gain, notwithstanding that he was no longer a shareholder at the time he received the funds - and that this broad construction of the words "in any manner whatever" in s. 84(2) accorded with Merritt, Smythe, and RMM.

Scott Armstrong.  Summary of MacDonald v. The Queen, 2013 FCA 110 under s. 84(2).