For accounting purposes the taxpayer, which operated a racquetball club, had brought initiation fees into income over a ten-year period on a straight-line basis. Before affirming a finding of the Tax Court Judge that the taxpayer, in substance, had thereby been deducting a reserve under s. 20(1)(m), McDonald J.A. stated (para. 20):
"... It is not the accounting treatment of an amount which governs deductibility, but rather the true nature of the amount deducted. The fact that the Appellant's books of account do not describe the amounts in question as a reserve does not mean that the Appellant did not in fact take a reserve."
However, it would distort income to bring all of the reserves previously claimed into income in the year of reassessment, and the matter was referred back to the Minister for redetermination on the basis that the initiation fees were taxable in the year of receipt.