Where a taxpayer receives an inflated donation receipt, may the taxpayer claim a charitable donation credit for the cash amount of the gift?

According to the Tax Court of Canada in David v. The Queen (2014 TCC 117), in the absence of any extraordinary circumstances, the answer to that question will be yes.


In David, the taxpayers paid certain amounts to a tax return preparer as cash donations to a registered charity. In exchange, the taxpayers received donation receipts from the charity in amounts the Minister claimed were ten times greater than their cash donations. The taxpayers subsequently claimed charitable donation tax credits under subsection 118.1(3) of the Income Tax Act (Canada) (the “Act”) based on the inflated donation receipts.

The Minister disallowed the full amount of the donation tax credits claimed by each taxpayer. The taxpayers appealed the Minister’s reassessments on the basis that at least a portion of the credits should be allowed.

Decision of the Tax Court of Canada

The Court determined on the evidence that the amount that each taxpayer paid as a donation to the charity was 10% of the face value of their donation receipt.

The Minister argued that the donation amounts were not true “gifts” and could not therefore give rise to a claim for charitable tax credits by the taxpayers. The basis for the Minister’s argument was that the amounts were paid on the expectation of receiving a benefit: an inflated charitable donation receipt.

The Court disagreed, stating that “the issuance of an inflated tax receipt should not usually be considered a benefit that negates a gift”. However, there may be extraordinary circumstances that should be taken into consideration. Accordingly, the Court concluded that the taxpayers were entitled to claim a charitable tax credit in respect of 10% of the face value of their donation receipts. The Tax Court did not consider the Minister’s argument that the taxpayers lacked donative intent as it was not raised in the Minister’s pleadings. The Court ordered the cancellation of the penalties (if any) imposed against the taxpayers.


David is a helpful decision for taxpayers whose claims for charitable donation tax credits have been entirely disallowed by the Canada Revenue Agency (“CRA”) on the basis that the provision of an inflated donation receipt vitiates a gift. As of the writing of this article, the David decision had not been appealed to the Federal Court of Appeal. If appealed, the Court of Appeal may clarify the law on gifts, donative intent and inflated donation receipts. For example, in reaching its conclusion, the Tax Court relied on the Federal Court of Appeal’s decision in The Queen v. Doubinin (2005 FCA 298), in which the Court of Appeal held that the issuance of an inflated tax receipt was not a benefit that negated the taxpayer’s gift. In Doubinin, the taxpayer had no knowledge of any wrongdoing and that there was no expectation of a benefit when he made the donation. It is not clear whether or how much weight the Tax Court in David placed on these facts or if these facts are examples of “extraordinary circumstances” that should be considered by a court.