Digests

Income Tax

Gifts

Appeal from Tax Court of Canada (T.C.C.) decision (2008 TCC 344) allowing respondent’s appeal from reassessment by Minister of National Revenue—That reassessment disallowing charitable tax credit in respect of donation of two promissory notes to deceased’s charitable foundation—Tax Court Judge basing decision on three findings: (1) Income Tax Act, R.S.C., 1985 (5th Supp.), c. 1 (ITA), s. 251(1) deeming persons involved in transaction herein dealing at arms’s length; (2) persons involved in transaction actually dealing at arm’s length; (3) sale not constituting misuse, abuse of provisions of Act within meaning of s. 245(4)—Judge wrong to conclude, after having found that Act, ss. 251(1)(a),(b) not applying to facts before him, that s. 251(1)(c) could not apply either—Implicit in scheme of Act, s. 251(1) that para. (c) applying if neither (a) nor (b) applying—However, since Judge proceeding to conduct factual inquiry as to whether sale of notes was at arm’s length, misinterpretation not material to decision—Given facts of case, Tax Court not erring when determining disposition of Foundation’s notes to third party constituting arm’s length transaction falling within redemptive provision of Act, s. 118.1(13)(c)—T.C.C. also not erring when concluding sale of promissory notes by Foundation not constituting misuse or abuse of ITA, s. 118.1(13) within meaning of s. 245—ITA, s. 118.1(18) disqualifying certain gifts from charitable tax credit given practical difficulty of assessing fair market value—S. 118.1(13)(c) permitting taxpayers to claim credit if, within prescribed time, charity disposing of “non-qualifying security” to third party in arm’s length transaction—Arm’s length sale of promissory notes by Foundation to third party in exchange for note therefrom for same amount providing reliable basis for Minister to treat face value of notes as fair market value, to allow charitable tax credit claimed in respect of this amount—Appeal dismissed.

Remai v. Canada (A-464-08, 2009 FCA 340, Evans J.A., judgment dated November 19, 2009, 25 pp.)