Rainbow Pipe Line Co. Ltd. v. Canada, 2002 DTC 7124, 2002 FCA 259 -- summary under Improvements v. Repairs or Running Expense

The Court affirmed the decision of Morgan T.C.J. that the cost of replacing 44 km of the taxpayer's 781 km light crude oil pipeline should be capitalized rather than expensed on income account. Morgan T.C.J. had regard to well-accepted business principles in determining that capitalizing the cost would provide a more accurate picture of the taxpayer's income for 1994, on the basis of expert evidence he had concluded that there was much stronger support in GAAP for capitalizing the costs, and he had taken into account that the expense was non-recurring, was a major repair, brought into existence an asset and was substantial in relation to the book value of the whole pipeline, other expenses and annual profits.