On December 12, 2008, the Federal Court of Appeal released its judgment in the case of 2530-1284 Quebec Inc. The main issue in the case, which concerned a series of transactions that the taxpayers had put in place to generate capital dividend accounts in a vertical chain of corporations, went to whether the income generated was capital or income. The Federal Court in its judgment confirmed the lower court decision that amounts paid to taxpayers were business income and not capital and that dividends distributed to the implementers of the structure were ordinary taxable dividends and not capital dividends.

type Tax News Advisory - January 2009 - Federal Court Confirms Validity of Daylight Loans in Tax Planning