Section 181.3

The taxpayer, and a partnership of which it was a member, leased equipment. Sarchuk T.C.J. accepted evidence that upon execution of the leases the taxpayer or the partnership was treated for accounting purposes as having disposed of the assets to the lessees and that the accounting carrying value of the resulting amounts on its or the partnership's balance sheet represented financial assets (i.e., amounts receivable by it). Given that the whole of Part I.3 of the Act relied on balance sheets and GAAP in the determination of a corporation's taxable capital employed in Canada, Sarchuk T.C.J. found (at p. 64) that:

"It seems only reasonable to conclude that the technical terms referable to the balance sheet ought to be defined and characterized for the purposes of Part I.3 of the Act by reference to accounting terminology."

Therefore, because the amounts were not tangible property for accounting purposes, they were not tangible property for the purposes of s. 181.3(1).

In the financial statements of the taxpayer (a life insurance company) that were prepared in accordance with the OSFI rules, gains or losses realized from the disposition of investments together (in some cases) with unrealized gains and losses were amortized as an addition to (or deduction from) income over time on a systematic basis, with the unamortized gain (or loss) being subtracted (or added) to the carrying value of the taxpayer's investments shown on its balance sheet. O'Connor TCJ. found that because the taxpayer thus did not treat the unamortized gains as "surplus" or a "reserve" in its balance sheet, they were not included in capital under s. 181.3(3)(b)(ii) or s. 181.3(1)(c)(ii)(B)(I).

In the financial statements of the taxpayer (a life insurance company) that were prepared in accordance with the OSFI rules, gains or losses realized from the disposition of investments together (in some cases) with unrealized gains and losses were amortized as an addition to (or deduction from) income over time on a systematic basis, with the unamortized gain (or loss) being subtracted (or added) to the carrying value of the taxpayer's investments shown on its balance sheet. O'Connor TCJ. found that because the taxpayer thus did not treat the unamortized gains as "surplus" or a "reserve" in its balance sheet, they were not included in capital under s. 181.3(3)(b)(ii) or s. 181.3(1)(c)(ii)(B)(I).