The Sheldon Inwentash and Lynn Factor Charitable Foundation Case - public vs. private foundation

The Federal Court of Appeal recently released a decision in The Sheldon Inwentash and Lynn Factor Charitable Foundation matter.  Essentially the question is whether a charity that has one trustee can be a public foundation or must it be a private foundation.  The Trust was given charitable status as a private foundation and the Trust appealed arguing that it should be designated a “public foundation”.  The court starts by discussing the standard of review that would be used and then analysed the relevant Income Tax Act provisions.  In terms of standard of review CRA argued that a decision on whether a charity is a private or public foundation is “mixed fact and law which is subject to review on the standard of reasonableness” as opposed to an “extricable question of law to be reviewed on the standard of correctness”.  The Court felt that some piece of the decision as to whether a charity is a private foundation could be a matter of law and then subject to the higher standard of correctness.  So the courts applied the higher standard of correctness to the CRA decision and then agreed with the CRA that they had acted correctly.  The court concluded that a charity with one trustee will be a private foundation as CRA had determined.  The decision also looks at the differential treatment of private foundations and discusses some of the history of why private foundations were treated differently than public foundations and concerns about private foundations.