If Aco is incorporated to purchase the assets of Bco and then purchases the assets, Bco’s safe income is not increased by any gain realized on the sale if the incorporation of Aco triggers the safe income determination time. The CRA noted that Bco could pay a dividend from safe income that included the gain where the dividend is not paid as part of the series of transactions that included the sale.
APFF 2022 Conference question 14, summarized in Tax Topics no 2660 (February 28, 2023)
