Cases
CDSL Canada Limited v. Canada, 2010 DTC 5055 [at 6746], 2008 FCA 400
The taxpayers, which carried on consulting businesses, computed their income for financial statement purposes by valuing the work in progress at...
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| Tax Topics - Statutory Interpretation - Specific v. General Provisions | 215 |
Friesen v. Canada, 95 DTC 5551, [1995] 3 S.C.R. 103
The taxpayer, who along with others held an interest in an undeveloped real estate property as an adventure or concern in the nature of trade, was...
Coppley Noyes & Randall Ltd. v. The Queen, 91 DTC 5291, [1991] 1 CTC 541 (FCTD), varied on appeal 93 DTC 5196, 5508 (FCA).
In commenting on the Anaconda case, Reed J. stated (p. 5298):
"... I think it is well known that the reasoning of the Privy Council in overruling...
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| Tax Topics - General Concepts - Accounting Principles | 94 | |
| Tax Topics - General Concepts - Payment & Receipt | presumed application to oldest debt | 103 |
| Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(l) | 92 |
Quirinus C. Van Dongen v. Her Majesty The Queen, 90 DTC 6633, [1991] 1 CTC 86 (FCTD)
The taxpayer acquired a residence and condominium from his son in order to secure a loan which he previously had made to his son, rather than in...
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| Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Business | 68 |
The Queen v. Cyprus Anvil Mining Corp., 90 DTC 6063 (FCA)
The taxpayer, which had a calendar year-end, generally computed its income for accounting and income tax purposes using the lower of cost and...
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| Tax Topics - Income Tax Act - Section 9 - Computation of Profit | 91 | |
| Tax Topics - Statutory Interpretation - Specific v. General Provisions | 66 |
The Queen v. Thyssen Canada Ltd., 87 DTC 5038, [1987] 1 CTC 112 (FCA)
Late-payment charges which were in respect of inventory purchases and whose deduction was denied by s. 18(4) were not permitted to be added to the...
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| Tax Topics - Income Tax Act - Section 18 - Subsection 18(4) | 46 | |
| Tax Topics - Income Tax Act - Section 248 - Subsection 248(28) | 62 |
The Queen v. Metropolitan Properties Co. Ltd., 85 DTC 5128, [1985] 1 CTC 169 (FCTD)
Amounts expended by a developer in installing sewers, water mains, street lights, paved roads and sidewalks, telephone and electrical services and...
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| Tax Topics - General Concepts - Estoppel | 51 | |
| Tax Topics - Income Tax Act - Section 9 - Accounting Principles | 79 |
Saskatchewan Co-Operative Credit Society Ltd. v. The Queen, 84 DTC 6225, [1984] CTC 628 (FCTD), aff'd 85 DTC 5599 [1986] 1 CTC 53 (FCA)
Although "it may be that shares held by a company which is in the business of buying and selling shares can be regarded as inventory" the shares...
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| Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(b) - Capital Loss v. Loss | 138 | |
| Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(p) - Subparagraph 20(1)(p)(i) | potential to deduct on general principles | 57 |
Qualico Developments Ltd. v. The Queen, 84 DTC 6119, [1984] CTC 122, 84 DTC 6126 (FCA)
It was held that "the cost of landscaping around dwelling houses constructed for sale in the course of business is clearly a part of the cost of...
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| Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(aa) | inventory costs not included | 321 |
| Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Inventory | 52 | |
| Tax Topics - Income Tax Act - Section 9 - Timing | 40 | |
| Tax Topics - Statutory Interpretation - Scheme | 67 |
Rudolph Furniture Ltd. v. The Queen, 82 DTC 6196, [1982] CTC 211 (FCTD)
S.10(1) appears to have been interpreted as requiring that all the inventory be valued at cost or all the inventory be valued at fair market...
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| Tax Topics - Income Tax Act - Section 10 - Subsection 10(3) | 26 |
Minister of National Revenue v. Shofar Investment Corporation, 79 DTC 5347, [1979] CTC 433, [1980] 1 S.C.R. 350
The practice required by the Act "in the computation of the profit of a trading business is to deduct from the aggregate proceeds of all sales the...
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| Tax Topics - Income Tax Act - Section 78 - Subsection 78(1) | 50 |
Handy & Harman of Canada Ltd. v. MNR, 73 DTC 5401, [1973] CTC 507 (FCTD)
For financial statement purposes, the taxpayer, whose business was the processing of silver, used a perpetual inventory costing system under which...
Lawson v. Minister of National Revenue, 69 DTC 5155, [1969] CTC 201, [1969] S.C.R. 587
A mining stock promoter acquired treasury shares of a junior mining company and while he was selling as many shares as he could on The Toronto...
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| Tax Topics - General Concepts - Fair Market Value - Shares | 106 | |
| Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(e) | 145 |
Irwin v. The Queen, 64 DTC 5227, [1964] CTC 362, [1968] S.C.R. 462
Abbott J. indicated, in obiter dicta that he doubted whether the combined effect of s. 14 of the pre-1972 Act and Regulation 1800 made any change...
MNR v. Anaconda American Brass Ltd., 55 DTC 1220, [1955] CTC 311 (PC)
The taxpayer, which for corporate purposes had been using the F.I.F.O. method for determining the cost of its sales of manufactured metals and its...
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| Tax Topics - Income Tax Act - Section 9 - Accounting Principles | 48 |
See Also
Yorkwest Plumbing Supply Inc. v. The Queen, 2020 TCC 122
As an indirect consequence of switching from a periodic system for tracking inventory to a perpetual inventory tracking system on March 1, 2009...
Kruger Incorporated v. The Queen, 2015 DTC 1127 [at 788], 2015 TCC 119, rev'd 2016 FCA 186
The taxpayer traded foreign currency options, with its principal option activity being the writing of European-style puts and calls with banks as...
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| Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Inventory | options contracts purchased, but not those written, were inventory | 122 |
| Tax Topics - Income Tax Act - Section 4 - Subsection 4(1) - Paragraph 4(1)(a) | paper manufacturer's large-scale options-trading operation was a separate business | 166 |
| Tax Topics - Income Tax Act - Section 9 - Timing | realization principle applied to FX options written by taxpayer | 307 |
Grant v. The Queen, 2000 DTC 1985 (TCC) (Informal Procedure)
The promoters of limited partnerships were traders in real estate and sold properties to the partnerships with the intention that the partnerships...
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| Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(b) - Capital Loss v. Loss | 52 |
General Motors Acceptance Corp. of Canada Ltd. v. The Queen, 2000 DTC 1844 (TCC)
Rip TCJ. found that there was no evidence before him that conditional sales contracts purchased by the taxpayer from General Motors dealers were...
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| Tax Topics - Income Tax Act - Section 12 - Subsection 12(1) - Paragraph 12(1)(c) | 162 | |
| Tax Topics - Income Tax Act - Section 9 - Agency - Agency | undisclosed principal | 162 |
Ruland Realty Ltd. v. The Queen, 98 DTC 2172, [1998] 4 CTC 2313 (TCC), briefly aff'd 2000 DTC 6142 (FCA)
Companies affiliated with the taxpayer, which was a developer of residential subdivisions, entered into land purchase agreements, used bank...
Stein v. The Queen, 96 DTC 1526 (TCC)
The taxpayer acquired a Florida condominium for speculative purposes, and before sale, defrayed his costs by renting the property out for part of...
Consoltex Inc. v. The Queen, 96 DTC 1812, [1996] 1 CTC 2752 (TCC)
In its 1979 and prior years, and in its 1983 and subsequent years, the taxpayer valued its inventories at the lower of cost and market for...
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| Tax Topics - Income Tax Act - Section 9 - Accounting Principles | 125 |
Northwood Pulp and Paper Ltd. v. The Queen, 96 DTC 1105 (TCC), aff'd 98 DTC 6640 (FCA)
The estimated costs of reforestation work which the taxpayer became obliged to perform in future years when it harvested timber, did not form part...
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| Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(a) - Incurring of Expense | 50 |
Orlando Corp. v. The Queen, 94 DTC 1046, [1994] 1 CTC 2113 (TCC)
Payments made by a real estate developer to the City of Mississauga in lieu of conveying park lands to the City were required to be added to the...
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| Tax Topics - Income Tax Act - Section 152 - Subsection 152(4) | notices reiterating Part IV and I tax balances from previous notices were not reassessments | 94 |
Weatherhead v. MNR, 90 DTC 1398, [1990] 1 CTC 2579 (TCC)
On the authority of the Bailey decision, the taxpayer was entitled to value each of three properties which were held by him as an adventure in the...
Bailey v. MNR, 90 DTC 1321, [1990] 1 CTC 2450 (TCC)
The taxpayers, who acquired farm land in connection with an adventure in the nature of trade and not for use in a trade, were entitled to write...
Eckel v. Board of Inland Revenue, [1989] BTC 94 (PC)
On September 26, 1972 an individual entered into a contract to sell land to a company of which the sole directors were her and her husband, and in...
Saskatchewan Wheat Pool v. The Queen, 85 DTC 5034, [1985] 1 CTC 31 (FCA)
Grains that were owned by another person nonetheless formed part of the taxpayer's inventory because variations in the grains' quality or quantity...
Thomson Hill Ltd. v. C.I.T. (Singapore), [1984] BTC 124 (PC)
Property taxes paid by a land developer that followed the completed-contract method were directly attributable to housing development sites being...
Lowe & Ors. v. C.I.R. (New Zealand), [1984] BTC 3 (PC)
The taxpayers argued unsuccessfully that since "historic cost accounting was unfair", their profit from the sale of land inventory should be...
Kelly, Douglas & Co. Ltd. v. MNR, 76 DTC 1090 (T.R.B.)
The taxpayer was entitled to deduct in the year of acquisition the costs of supplies of stationery and special forms that it had on hand at the...
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| Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Inventory | 38 |
B.S.C. Footwear Ltd. v. Ridgway, [1972] A.C. 544 (HL)
A shoe retailer, for the purpose of applying the lower of cost and market rule in valuing its inventories of shoes, took the anticipated selling...
Ostime v. Duple Motor Bodies Ltd., [1961] 2 All E.R. 167 (HL)
A custom manufacturer of automobile bodies for many years had been costing its work in progress using the direct cost method, whereas the Crown...
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| Tax Topics - Statutory Interpretation - Resolving Ambiguity | 36 |
Hughes v. British Burmah Petroleum Co., Ltd. (1932), 17 TC 286 (KBD)
The taxpayer purchased the oil wells, plant and equipment of its subsidiary in consideration for issuing shares having a value of £120,000. The...
Administrative Policy
27 October 2011 Internal T.I. 2010-0382161I7 F - CPN-144 - remises et ristournes
May volume rebates received by food wholesalers from suppliers be applied to reduce the cost of the purchased food inventory, or must they be...
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| Tax Topics - Income Tax Act - Section 9 - Computation of Profit | purchase price rebates earned after purchase are income rather than inventory cost reduction | 178 |
1 May 2018 External T.I. 2017-0709101E5 F - Travaux en cours
Accountants, dentists, lawyers, physicians, veterinarians and chiropractors will maximize their deferrals if they choose to follow the direct cost...
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| Tax Topics - Income Tax Act - Section 10 - Subsection 10(5) - Paragraph 10(5)(a) | cost of professional practice WIP includes variable overheads and all related payroll costs, but not partner or shareholder-manager time | 193 |
| Tax Topics - Income Tax Act - Section 10 - Subsection 10(4) - Paragraph 10(4)(a) | WIP under a contingency fee basis generally has a nil value | 132 |
S4-F2-C1 - Deductibility of Fines and Penalties
1.20 ...If a fine or penalty is incurred in connection with the acquisition or production of inventory, the fine or penalty is included in the...
5 November 2003 Internal T.I. 2003-0043277 F - Benefit-Use of Automobiles
The CEO ("X") of an automobile sales company ("Opco"), and X's spouse held 51% and 49% of the shares of a holding company ("HoldcoX"), which held...
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| Tax Topics - Income Tax Act - Section 246 - Subsection 246(1) - Paragraph 246(1)(a) | s. 246(1)(a) application re mother’s use of a car of Opco controlled by her son’s Holdco to her rather than son turned on whether her minority Holdco had significant influence over Opco | 288 |
| Tax Topics - Income Tax Act - Section 15 - Subsection 15(5) | application of s. 15(5) to shareholder’s use of company automobile | 72 |
| Tax Topics - Income Tax Act - Section 9 - Computation of Profit | conversion of automobile in car inventory to personal use of CEO would not entail its deemed disposition nor would the conversion of car inventory to personal use of shareholders | 267 |
1 May 2000 Internal T.I. 1999-0010677 - Inventory Valuation
"An amalgamated corporation has the right to choose any inventory valuation methodology permitted by subsection 10(1). However, the amalgamated...
11 October 1996 APFF Roundtable, 7M12910 - APFF ROUND TABLE
Discussion of the distinction between a business and an adventure in the nature of trade.
8 August 1995 Internal T.I. 9517667 - COST OF IDENTICAL PROPERTY -- INVENTORY
RC's policy that escrowed shares are considered to be identical to freely tradeable shares of the same class, also applies to shares that are held...
1994 A.P.F.F. Round Table, Q. 12
Where the taxpayer follows a method of averaging initial production costs over the forecast number of units to be produced, "if the initial...
4 March 1994 External T.I. 9320985 F - Inventory
Where a corporation that has valued its inventories using the lower of cost and fair market value method for tax and financial statement purposes,...
93 CPTJ - Q.5
RC will not permit the fair market value of inventory to be based on a percentage of cost, or some ratio based on length of time inventory is held.
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| Tax Topics - Income Tax Act - Section 12 - Subsection 12(1) - Paragraph 12(1)(r) | 55 |
22 June 1993 T.I. (Tax Window, No. 32, p. 20, ¶2622)
Revenue Canada's concurrence will be required for a change in the method of determining cost, eg., a switch from the average cost method to the...
1 February 1993 T.I. (Tax Window, No. 28, p. 11, ¶2386)
Where the cost of developing a golf course situate in the middle of a residential development exceeds its estimated fair market value, the...
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| Tax Topics - Income Tax Act - Section 9 - Computation of Profit | 59 |
10 November 1992 Memorandum (Tax Window, No. 27, p. 19, ¶2344)
Where land is owned by a joint venture and one of the joint venturers is a land developer, the other joint venturers will not be permitted to...
October 1992 Central Rulings Directorate Tax Seminar, Q. D (May 1993 Access Letter, p. 229)
Joint venturers who are engaged in an adventure in the nature of trade are not entitled to write down the value of their land inventory.
14 November 1991 Memorandum (Tax Window, No. 11, p. 2, ¶1534)
The accrued discount on treasury bills held in the inventory of a financial institution did not increase their cost for purposes of application of...
89 C.M.TC - Q.19
"cost" refers to original cost. Therefore, a write-down potentially can be reversed.
89 C.M.TC - Q.20
s. 10(1) does not apply to land held as an adventure or concern in the nature of trade.
88 C.R. - Q.50
Since one does not compute business income or loss from property which is the subject of an adventure in the nature of trade until the year in...
IT-473 "Inventory Valuation"
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| Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Inventory | 0 |
IT-165R "Returnable Containers"
Returnable containers can represent a substantial asset value and their cost cannot be written off as an expense in the year of acquisition. The...
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| Tax Topics - Income Tax Act - Section 12 - Subsection 12(1) - Paragraph 12(1)(a) | 0 |
IT-153R3 "Land Developers - Subdivision and Development Costs and Carrying Charges on Land"
(Para. 13) Costs in respect of installations within a subdivision, which are considered to constitute a component of the cost of the land...
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| Tax Topics - Income Tax Act - Section 18 - Subsection 18(2) | 0 | |
| Tax Topics - Income Tax Act - Section 18 - Subsection 18(3) - Land | 0 | |
| Tax Topics - Income Tax Act - Section 54 - Adjusted Cost Base | 32 |