The appellant was reassessed under subsection 160(1) of the Income Tax Act for the tax liability of a related corporation, Bakorp.
The Minister alleged that deemed dividends resulting from an increase in stated capital, as well as declared dividends evidenced by promissory notes, constituted transfers of property.
The Tax Court of Canada allowed the appeal, finding that neither the deemed dividends nor the declared dividends (which were unpaid and evidenced only by demand promissory notes) constituted a transfer of property under section 160, as there was no actual divestment of assets or impoverishment of the transferor.
