Ian S. MacGregor

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.

The taxpayer claimed business losses from trading in gold futures, reporting losses when incurred and gains when realized.

The Minister reassessed, arguing for a 'marked to market' accounting method.

The Supreme Court of Canada dismissed the Crown's appeal, upholding the taxpayer's accounting method and affirming the lower courts' findings that the loss and gain legs of a spread transaction could be considered in isolation.

The Minister of National Revenue reassessed the respondent, attributing dividends paid to his wife on her Class B shares to his income under s. 56(2) of the Income Tax Act.

The dividends were declared pursuant to a discretionary dividend clause in the company's Articles of Incorporation.

The Supreme Court of Canada held that the discretionary dividend clause was valid under corporate law and did not violate the common law presumption of equality among shares.

The Court further held that s. 56(2) generally does not apply to dividend payments, and the dividends paid to the wife were a legitimate return on her investment and contribution to the company, not a tax avoidance scheme.

The Crown's appeal was dismissed.

The respondent taxpayer received $300 from her employer for successfully completing three life insurance courses.

The Minister reassessed her to include this amount in her income.

The Supreme Court of Canada held that while the payment was a benefit in respect of employment under sections 5 and 6 of the Income Tax Act, it also qualified as a 'prize for achievement in a field of endeavour ordinarily carried on by the taxpayer' under section 56(1)(n).

Because the amount was under the $500 statutory exemption limit, it was not subject to tax.

The Crown's appeal was dismissed.