The safe income of a corporation ("Kruger") from which the taxpayer received a deemed dividend did not exclude income resulting from investment tax credits (which produced income inclusions under s. 12(1)(t) or reduced capital cost allowance claims by virtue of ss. 13(7.1)(e) and 13(21)(f)(vii)). Regarding the position of the Minister that amounts that do not constitute actual income earned ("phantom income") should not be considered as safe income, Dussault T.C.J. indicated that this position failed to reflect that income for tax purposes is not a logical and coherent concept that reflects reality and that the wording of s. 55(2) (and, in particular, s. 55(5)(c)) "does not permit any such orientation in the name of a perhaps desirable but non-existent realism" (p. 685). Furthermore, the approach of the Minister would result in double taxation (as a capital gain in the hands of the taxpayer) of amounts that had already been taxed to the corporation.
However, the safe income of the corporation was reduced by the excess of the $4 million purchase price for an SRTC debenture over the amount of the debenture. Dussault T.C.J. noted (at p. 686) that this excess was "the equivalent of a non-deductible expense and thus must logically be adjusted".