The appellant sold its rights in a software program and received lump-sum and additional payments based on sales.
The Minister reassessed the appellant, including the additional payments in income under paragraph 12(1)(g) of the Income Tax Act, which reduced the appellant's capital dividend account and triggered Part III tax on excess capital dividends.
The Tax Court held that the additional payments were earn-out payments dependent on the use of or production from property, and thus taxable under paragraph 12(1)(g).
The appeal of the income tax reassessments was dismissed.
However, because the appellant made valid protective elections under subsection 184(3), the appeal of the Part III tax assessments was allowed.
