The deceased taxpayer was a status Indian residing on a reserve who held term deposits with a Caisse Populaire Desjardins situated on the reserve. The Tax Court and Court of Appeal held that the resulting interest income was not exempted under s. 87 because the Caisse had earned the income to pay the interest in the commercial mainstream. The Supreme Court granted the taxpayer's appeal on the grounds that the interest income was property of an Indian situated on a reserve.
After referring to the two-step test in Williams, Cromwell J referred (at para. 41) to "the ongoing relevance to the Indian Act exemption of general legal principles about the location of property," noted (at para. 45) that "the type of property [namely, passive income on a debt] supports the view that the connecting factors of the place of contracting, the place of performance and the residence of the debtor should weigh heavily in attributing a location to the interest income," and that, conversely, "the Caisse's income-producing actions and contracts after Mr. Bastien invested in term deposits cannot be deemed his own" (para. 51). He went on to state (at para. 52):
[T]he Recalma line of cases has sometimes wrongly elevated the "commercial mainstream" consideration to one of determinant weight. More precisely, several decisions have looked to whether the debtor's economic activity was in the commercial mainstream even though the investment income payable to the Indian taxpayer was not.