Romkey v. Canada
A-405-97 / A-406-97
Stone J.A.
24/12/99
14 pp.
Appeals from T.C.C. judgments amounts of dividends declared and paid in 1988, 1989, 1990 by Brimar Developments Ltd. (Company) must be included in respective incomes of appellants for taxation years 1988, 1989, 1990 pursuant to Act, s. 74.1-T.C.J. found appellants divested themselves of right to receive dividends; transferred property, namely shares, indirectly by means of trust for benefit of their infant children and dividend income from those shares deemed to be income of appellants-Appeal dismissed-First issue whether reasoning in The Queen v. Kieboom, [1992] 3 F.C. 488 (C.A.) dispositive of issue of whether dividends received by trusts taxable in hands of appellants pursuant to Act, s. 74.1(2)-Three requirements must be met in order for Act, s. 74.1(2) to apply: transfer (either directly or indirectly) to child under 18; of property; and generation of income or loss from property transferred or from property substituted therefor-By causing class B shares to be issued to trusts, appellants effectively forewent right to receive increased measure of any future dividends declared and paid by Company-Second, appellants cannot argue only dividends paid on trusts' class B shares in 1989 and 1990 should be attributable to appellants and not 1988 dividends, because only at time subscription price paid in 1989 did transfer of property occur-This does not enable appellant to escape from broad provisions of Act, s. 74.1(2) with respect to 1988 dividends-By causing class B shares to be issued to trusts in 1987, appellants had already effected transfer of property to respective children, i.e. divesting themselves of right to receive measure of future dividends-No difference in application of provision that appellants may have paid no part of subscription price of trusts' class B shares prior to date of 1988 dividends-Income Tax Act, S.C. 1970-71-72, c. 63, s. 74.1(2) (as enacted by S.C. 1986, c. 6, s. 38(1); c. 55, s. 17(1)).