Seaboard Finance Company v. Commissioner of Internal Revenue

Here for review we have an income tax question of Seaboard Finance Company involving the appreciation in value of $2,200,000 Canadian dollars in terms of United States dollars in about a seven month period in 1946. The dollars had no physical existence in this case, but were represented by a credit obligation running from Industrial Acceptance Corporation, Limited, a Canadian corporation, to Seaboard. At the same time a somewhat similar, but still varying, dollar obligation, not due, ran from Seaboard to Industrial in about an equal amount.

The customary positions of the Commissioner of Internal Revenue and of a taxpayer on domestic transactions are transposed. Seaboard claims the appreciation in value of Canadian dollars during the time the credit existed resulted in a capital gain in Canada and the Commissioner says there was no gain at all. We are told by the parties that the gain, if there is one, is the kind of capital gain which is not taxable in Canada. However, if it be a capital gain in Canada on foreign exchange, it will produce tax credits for Seaboard on its United States income tax return for the fiscal year ending September 30, 1947, worth $70,590.-74 (United…