Declare it. No question.

I bought my wife an anniversary ring in Mexico. It was over the limit by itself, but only by a few hundred. Declared it, and told the story about it being our 20th, etc. The agent just said "Happy Anniversary!" and sent us on.

Now, understand, they are in their rights to make you pay, that is their job. Whenever you bring something into the country that is over the duty-free limit, you need to be prepared for that, and willing to accept whatever happens. If not, buy it in Canada.