Précis: Ms. Bell was a status Indian but did not live on a reserve. She owned 51% of the shares of Reed Steel Ltd.; her husband, Mike Bell, owned the other 49% of the shares. Mr. Bell was not a status Indian. Reed Steel’s office was located on the Capilano Indian Reservation #5, a reserve as defined by the Indian Act. Reed Steel carried on most of its business activities outside of the reserve. During the taxation years under appeal, 2005 to 2008, Reed Steel paid its net profits (after salaries and other operating expenses) to Ms. Bell by way of bonuses. Ms. Bell claimed that the bonuses were exempt under section 87 of the Indian Act. CRA denied the exemption and she appealed unsuccessfully to the Tax Court which found that the bonuses were unreasonable and not effectively connected with the reserve. Ms. Bell appealed to the Federal Court of Appeal which dismissed her appeal, with costs. The Court of Appeal found that the reasonableness of the bonuses was not an appropriate factor for determining their connection with the reserve but concluded that the other salient factors led to the conclusion that the bonuses were not effectively connected with the reserve.
Bell v. R. – FCA: Bonuses not exempt under Section 87 of Indian Act – not effectively connected with a reserve. Reasonableness of bonuses not a factor.READ MORE »