Friedberg v Canada

Holding

A taxpayer's choice of accounting method for commodity futures straddles must be accepted for tax purposes if it provides an accurate picture of income, even though the method results in significant tax deferral.

Facts

Friedberg, a commodities trader, used a method that recognised losses on closed legs of futures straddles immediately while deferring gains on open legs. The Minister sought to reassess on the basis that the method did not give an accurate picture of income.

Reasoning

The Supreme Court adopted Justice Linden's reasons in the Federal Court of Appeal. Because section 9 of the Income Tax Act does not prescribe a particular accounting method, taxpayers may choose any method that conforms to generally accepted commercial principles and accurately reflects income. The Crown's preferred method was not mandated by the Act.