Friedberg v. Canada, [1993] 4 S.C.R. 285

Her Majesty The Queen Appellant

v.

Albert D. Friedberg Respondent

Indexed as: Friedberg v. Canada

File No.: 22924.

1993: November 5.

Present: Lamer C.J. and L'Heureux‑Dubé, Sopinka, Gonthier, McLachlin, Iacobucci and Major JJ.

on appeal from the federal court of appeal

Income tax ‑‑ Loss from business ‑‑ Taxpayer claiming deductions for business losses arising out of trading in gold futures ‑‑ Whether losses deductible.

Statutes and Regulations Cited

Income Tax Act, R.S.C. 1952, c. 148 [am. 1970‑71‑72, c. 63, s. 1], s. 245(1).

APPEAL from a judgment of the Federal Court of Appeal (1991), 1991 CanLII 14017 (FCA), 135 N.R. 61, [1992] 1 C.T.C. 1, 92 D.T.C. 6031, reversing in part a judgment of Jerome A.C.J. (1989), 1989 CanLII 10158 (FC), 25 F.T.R. 22, [1989] 1 C.T.C. 274, 89 D.T.C. 5115. Appeal dismissed.

Ian S. MacGregor, Q.C., J. Paul Malette, Q.C., and David E. Spiro, for the appellant.

Barry S. Wortzman, Q.C., Martin L. O'Brien, Q.C., and Thomas McRae, for the respondent.

The judgment of the Court was delivered orally by

Iacobucci J. ‑‑ We are all of the view that this appeal should be dismissed.

The respondent taxpayer traded extensively in commodity futures during the taxation years 1978 to 1981 and claimed as income tax deductions business losses arising out of trading in gold futures on his own account.

On the facts, the respondent reported his losses when they were actually incurred, and his gains when they were actually realized. In our view, the appellant has not demonstrated that there is any error in adopting this approach. While the "marked to market" accounting method proposed by the appellant may better describe the taxpayer's income position for some purposes, we are not satisfied that it can describe income for income tax purposes, nor are we satisfied that a margin account balance is the appropriate measure of realized income for tax purposes. Similarly, while we recognize that the "lower of cost or market" method advocated by the respondent suggests that unincurred losses can be deducted in the calculation of income, no unincurred losses were deducted by the respondent on the facts of this case. Accordingly, we need not determine the income tax validity of this implication of the "lower of cost or market" method in this case.

As to whether it is appropriate to consider the loss and gain legs of a spread transaction in isolation from one another, and as to whether s. 245(1) of the Income Tax Act, R.S.C. 1952, c. 148, as amended, assists the appellant in this case, we substantially agree with the reasons of the learned trial judge as affirmed by Linden J.A. of the Federal Court of Appeal on these points.

Accordingly, the appeal is dismissed with costs.

Judgment accordingly.

Solicitor for the appellant: John C. Tait, Ottawa.

Solicitors for the respondent: Shibley Righton, Toronto.