Obviously you don’t want deficits to occur, but this does contribute to the value of a company. Ever hear of a company being bought by another because they had significant write-downs on their books. It’s seems counter intuitive, but this is how the tax system works.

I even know a number of personal investors that run their accounts through a holding company that have engaged in a similar process. This is the process, you took major losses last year (sold assets at a loss), since the government doesn’t tax losses you have the benefit of carrying those losses forward against any future earnings. One person I know well at the trough of the market after mayhem spun his negative experience into a positive, “at least I won’t have to pay tax for the next 5 years” he said.

http://media.integratir.com/T.BRK.UN/financials/Brick%20Fund%20FS%20Q3%202009%2011%2004%2009%20-%20FINAL%20-%20ld.pdf

it also posted a net profit of 0.5 million ie average of 2 million per annum. If it is able to maintain its improved performance it will take 235 years to wipe out the deficit of $569 million from its books and complete the turnaround.

Any clarifications would be welcome

To demonstrate a clear turnaround they would have to post a net profit greater than 18 million in this current fourth quarter of 2009 as there is no more goodwill left to be impaired. Since in the third quarter the net profit was only 3.6 million before special charges it would have to do exceedingly well for the net income to jump five fold from 3.6 to 18 million. Any clarifications would be welcome.

If you go to http://www.mondaq.com/article.asp?articleid=88004 you will find a good analysis. I will paste some comments from their site below: At the time the SIFT Legislation was announced, the Department of Finance announced that rules (the "Conversion Rules") would be enacted to allow entities that were affected by the SIFT Legislation to convert into taxable Canadian corporations without any adverse tax consequences to them or their unitholders. The Conversion Rules were subsequently enacted into law on March 12, 2009 and contemplate the conversion of an income trust into a taxable Canadian corporation through either a unit-for-share exchange with a corporate successor (the "Exchange Method") or a distribution of shares of a corporate subsidiary by the income trust to its unitholders on redemption of the trust units (the "Distribution Method"). The Conversion Rules also provide for a tax-deferred wind-up of an income trust after it is taken over by a taxable Canadian corporation, which can allow the purchaser to offer unitholders a rollover on an exchange of income trust units for shares of the purchaser. It also allows the preservation of tax basis where the assets of the income trust have a tax cost greater than their fair market value.

So it seems there will not be a taxable consequence as long as the conversions are done according to the method described above; however, were told during the Conservatives election campaign that they would not be altering the income trust taxation structure and look what happened. I know a number of retirees that had a major wipe out of their portfolios after the suprise legislation was announced.