Subsidiary Controlled Corporation

40%f the shares of a Bahamian affiliate ("Bahamas") of the taxpayer were owned by the taxpayer and 60% of the shares of Bahamas were owned by another Bahamian corporation ("Abaco"). The taxpayer represented to Bahamian authorities that Bahamas was 60% owned by Bahamian nationals.

Most of the shares of Abaco were issued to individuals resident in Bahamas with the share certificates being immediately endorsed by them in blank and delivered to a shareholder of the taxpayer ("Hewitt") who took them back with him to Ontario within a few days. Beaubier T.C.J. found that such shares were owned by the taxpayer, with the result that Bahamas was not a subsidiary controlled corporation of the taxpayer.

An indirect subsidiary of the taxpayer did not qualify as a subsidiary controlled corporation given that "the word 'belong' means that the shares must belong directly to the parent company". (p. 1659)