Income Tax, Investment Income, and the Indian Act: Getting Back on Track [Canadian Tax Foundation, CTF]

"Recent case law on the application of the tax exemption in section 87 of the Indian Act to Indian investment income has taken a very different approach to the purpose and scope of the exemption from that expressed in the leading decisions from the Supreme Court of Canada. Most strikingly, the cases that have addressed the question of when a deposit account belonging to an Indian is situated on a reserve for purposes of section 87 reach the opposite conclusion to those considering the issue for purposes of its companion provision, the exemption from seizure in section 89 of the Indian Act, even though the Supreme Court of Canada has said that sections 87 and 89 are to be interpreted and applied in the same way. This article examines the jurisprudence in which the divergent approaches have developed and suggests a new approach for deciding when investment income and other intangible property of Indians is situated on a reserve, and thus exempt from taxation."