The Minister assessed the appellant trust under subsection 160(1) of the Income Tax Act in respect of dividends it received from a non-arm's length corporation that had an outstanding tax liability.
The trust appealed, arguing that the fair market value of the dividends should be reduced by the amount of income tax payable by the trust and its beneficiaries upon receipt of the dividends.
The Tax Court of Canada dismissed the appeal, following the Federal Court of Appeal's decision in Gilbert, which held that the fair market value of a transferred dividend must be assessed in the hands of the transferor, without regard to the tax consequences for the transferee.
