INCOME TAX
Gifts
Appeal from Tax Court of Canada (T.C.C.) judgment (2004 TCC 438) allowing appeal against reassessment denying charitable donation deduction—T.C.C. held it was charitable gift, allowed tax credit based on $6,887 donation—Taxpayer, on financial planner’s advice, confirmation by Canada Revenue Agency that Association for Betterment of Literacy and Education (ABLE) was registered charity, believed if donated $6,887 to ABLE, would become eligible to receive charitable donation receipts for $27,548 if non-resident trust, Publishers Philanthropic fund (PPF) of Bermuda made charitable donation to ABLE on taxpayer’s behalf equal to three times taxpayer’s donation—Taxpayer knew PPF not obliged to make matching donation to ABLE, did not even expect it would donate—In 1996 taxpayer donated $6,887 to ABLE and in 1997 received $27,548 tax receipt—As taxpayer advised by ABLE that PPF had made hoped-for contribution, taxpayer claimed $27,548 as tax credit on 1996 return—But Minister disallowed any tax credit as “inflated tax receipt”—When Minister advised taxpayer PPF had not, in fact, made contribution, taxpayer reduced claim to $6,887— T.C.C. found ABLE might be involved in fraudulent tax shelter but taxpayer not part of tax evasion scheme—Crown’s argument: since taxpayer hoped to secure $27,548 tax credit, he was not even entitled to credit for amount actually donated to charity and that reliance on “inflated tax receipt” constituted benefit thereby vitiating entire gift—Crown required to establish T.C.C. made erroneous finding of fact in perverse or capricious manner or without regard to evidence— F.C.A. unable to conclude T.C.C.’s finding of no expectation of benefit perverse, capricious, without regard to evidence— Crown relied on definition of gift in The Queen v. Friedberg (1992), 92 DTC 6031 (F.C.A.), “a voluntary transfer of property owned by a donor to a donee, in return for which no benefit or consideration flows to the donor”—Impossible for taxpayer to benefit from inflated tax credit as, even if PPF had donated, ABLE could not have validly issued receipt in taxpayer’s name for amount given by PPF: Income Tax Act, s. 118.1—If anything, “inflated tax receipt” burden as it impaired ability to receive tax credit for amount actually contributed to registered charity—Webb v. Canada, 2004 TCC 619, also involving ABLE, distinguishable in that T.C.C. found taxpayer knowingly participated in issuance of false receipts and also anticipated future return of large portion of gift, either from ABLE or through indirect channel—Appeal dismissed—Income Tax Act, R.S.C., 1985 (5th Supp.), c. 1, s. 118.1.
Canada v. Doubinin (A-481-04, 2005 FCA 298, Sexton J.A., judgment dated 15/9/05, 5 pp.)