Alnasir Meghji

The appellant gold mining company engaged in financial hedging transactions to protect against fluctuations in the spot price of gold.

The Minister of Finance assessed the net gains from these transactions as taxable 'proceeds' under the Mining Tax Act.

The trial judge upheld the assessment, finding a sufficient nexus between the transactions and the mine's output.

The Court of Appeal allowed the appeal, holding that the statutory definition of 'hedging' is clear and unambiguous, requiring the fixing of a price for the actual output of a mine before delivery.

Since the appellant sold all its gold at spot prices and did not deliver any gold pursuant to the hedging contracts, the gains were not taxable under the Act.

The appellant and other Canadians sought to acquire potential losses from a U.S. partnership for use as an income tax deduction in Canada.

They became assignees of the interests of the original American partners and immediately disposed of the partnership's apartment complex back to the original partners, realizing accounting losses.

They also acquired a one percent interest in a Canadian oil and gas property.

The Minister disallowed the claim for partnership losses under s. 96 of the Income Tax Act.

The Supreme Court of Canada dismissed the appeal, holding that the fundamental criteria of a valid partnership—carrying on business in common with a view to profit—were not met.

The Court found no intention to profit from the apartment complex and concluded the oil and gas investment did not establish an ancillary profit-making purpose.

Furthermore, the Court held that an assignee of a partnership interest must satisfy the essential ingredients of a partnership under Canadian law to be considered a partner for tax purposes.

The appellant taxpayer entered into debenture agreements to borrow New Zealand dollars at a high interest rate, and simultaneously entered into a forward exchange contract to convert the funds to US dollars for use in its business, while hedging the exchange rate risk.

The taxpayer deducted the high interest payments under s. 20(1)(c)(i) of the Income Tax Act and reported the resulting foreign exchange gain on capital account.

The Minister reassessed the taxpayer, arguing the interest deduction should be limited to the lower rate applicable to US dollars based on the economic realities of the transaction.

The Supreme Court of Canada held that the taxpayer's legal relationships must be respected and that the borrowed New Zealand dollars were directly used to earn income.

The Court allowed the appeal, permitting the full interest deduction, and dismissed the Minister's cross-appeal, holding the foreign exchange gain was on capital account.

The applicant brought a motion for directions to determine whether the respondent was required to seek leave to cross-appeal under Rule 29 of the Rules of the Supreme Court of Canada.

The respondent sought to argue that a currency gain realized by the applicant should be characterized as income rather than a capital gain, an issue decided against the respondent in the courts below.

The Supreme Court of Canada held that because the respondent's argument would not uphold the judgment of the Court of Appeal, the respondent was required to obtain leave to cross-appeal before raising the issue.

The appellant purchased a parcel of land for the purpose of reselling it at a profit, constituting an adventure in the nature of trade.

The property substantially decreased in value, and the appellant sought to deduct the decline in fair market value as a business loss under s. 10(1) of the Income Tax Act.

The Minister disallowed the deduction, and the lower courts upheld this decision.

The Supreme Court of Canada allowed the appeal, holding that on a plain reading of the Act, the appellant's venture was a 'business' and the property was 'inventory', entitling him to use the inventory valuation method to recognize a business loss in the taxation years prior to disposition.

The respondent, Crown Forest, rented barges from Norsk, a Bahamian company with its sole office in the United States.

Crown Forest withheld 10 percent tax on the rental payments, claiming Norsk was a resident of the U.S. under the Canada-United States Income Tax Convention (1980).

The Minister assessed the withholding tax at 25 percent, arguing Norsk was not a U.S. resident.

The Supreme Court of Canada allowed the Crown's appeal, holding that Norsk's tax liability in the U.S. was based on its source income effectively connected with a U.S. trade or business, not on world-wide income.

Therefore, Norsk did not meet the criteria for residency under Article IV of the Convention, and the 25 percent withholding tax applied.