The Tax Court of Canada recently released a decision in Bandi v. The Queen which dismissed an appeal by a taxpayer who participated in a charitable giving program in 2003. The taxpayer claimed a charitable donation tax credit which was initially allowed but then disallowed after a reassessment by the Minister. The gift totaled $5,996 and consisted of a cash payment and four software licenses. The Court found that there was no evidence that the software licenses even existed which makes it impossible for the software licenses to have been gifted. The Court also found that the taxpayer could not receive a tax credit for the cash gift that was provided since the cash gift could not be considered in isolation from the overall plan which was not properly implemented.
The Court noted “ The appellant insists that his cash donation should be considered separately from the alleged gift of the software licences. I disagree. In Maréchaux v. The Queen, the Federal Court of Appeal agreed that it is inappropriate to separate transactions forming part of an integral arrangement into their cash and non-cash parts.”
The Court dismissed the Appeal based on the fact that, “...evidence shows that the appellant’s goal was not to enrich himself. Rather, he intended to profit by participating in the Program through the acquisition of software that could be gifted to a charity for an enhanced tax benefit. The appellant’s expectations in this regard nullified his donative intent. His alleged cash gift cannot be considered in isolation from the overall plan, which the evidence shows was not properly implemented.”
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Mark Blumberg is a partner at the law firm of Blumberg Segal LLP in Toronto and works almost exclusively in the areas of non-profit and charity law.