We have been involved with an intricate tax case, which recently resulted in an appeal court ruling that we believe will assist Canadian taxpayers design and implement tax plans with greater clarity. A company can generally transfer capital to a connected corporation tax-free, as long as the transfer is part of its “safe income”, which corresponds roughly to “retained earnings for tax purposes”. The Income Tax Act does not provide specific guidance at to how “safe income” is determined. This case went to court several years ago (Kruco 2003 DTC 5506) and, unhappy with the outcome, the Canada Revenue Agency appealed the court decision. Notably, the recent ruling issued by the Federal Court of Appeal specifically disagrees with aspects of the Canada Revenue Agency’s computation of “safe income”, and the ruling has now clarified major elements of this computation. As a result of this important case, there is now a clearer definition of “safe income”, which will add certainty to many corporate reorganizations in the future. I would be pleased to hear any comments or field any questions that you may have relating to “safe income”.