In David v. Canada (2014 TCC 117), the Tax Court of Canada allowed six appeals concerning the disallowance of charitable donation tax credits on inflated donation receipts.
In each of these appeals, the taxpayers (or their spouses) received inflated donation receipts after donating only 10% of the face value of the receipt. The taxpayers claimed charitable donation tax credits based on their donation receipts and the Minister disallowed the entirety of the credits. The taxpayers appealed to the Tax Court of Canada.
Like its position in other similar cases, the Crown took the position in David that the tax credits were properly disallowed on the basis that the expectation of receiving an inflated tax credit was a benefit that negated any gift otherwise made. The main issue on appeal was therefore “whether an expectation of an inflated tax credit based on an inflated donation receipt is a benefit that negates the gift”.
Relying on the Doubinin case (2005 FCA 298) – a case which the Court acknowledged had very different facts from those in David – the Court held that “the issuance of an inflated tax receipt should not usually be considered a benefit that negates a gift”. The Court further found that while the Doubinin case seems to leave open the possibility that extraordinary circumstances could be taken into account in the analysis, there were no such circumstances to take into account in David.
This is a notable case in that the taxpayers were successful in obtaining a charitable donation tax credit for the 10% of the donation receipt that they had in fact donated. In a number of other recent decisions (e.g., Dhillon, 2014 TCC 25; Johnson, 2014 TCC 84), the taxpayers were not so successful and their credits were disallowed.