Sorry this happened to you. It's actually not that unusual to be question about an expensive item (and taxed) when crossing the border. However I think they applied the rule very very strangely in your wife's case (it would have made more sense to me if she had been taxed when re-entering the US, rather than entering Canada - hope you can somehow fight the charge).
As a general rule, if you're crossing the border with an expensive item (jewelry, camera, bike, etc.) then there's a form you should complete ahead of time and carry with you to ensure the item won't be taxed. I've done this on occasion when traveling out of Canada with my camera (to make sure I won't be taxed when I return to Canada because they think I bought the camera when I was away).
See below for information that covers both US and Canadian residents:
For any expensive items (especially your bike, but also cameras, lap tops, etc.), complete an Identification of Articles For Temporary Exportation (for Canadians going into the US) or Certificate of Registration for Personal Effects Taken Abroad - Customs Form 4457 (Americans entering Canada). You can obtain these forms at the border or at your local customs office. Have the form(s) stamped at the border or prior to your trip. The serial number of the item is recorded on the form and proves the origin of the item. Otherwise the item could be dutiable (and in Canada, GST-able). Once completed and stamped, keep these forms, they'll be good for future trips. Non Canadian/US citizens should check with their own country officials for similar documentation.
