Kossow - Tax Court strikes down another leveraged charitable donation arrangement

Another leveraged charitable gift transaction has been struck down.  V.A. Miller J. indicated, based on the reasoning in Maréchaux, that the financing of 80% of the gifts in question with a non-interest-bearing loan with a term of 25 years was itself a sufficient collateral benefit for those "gifts" not to qualify as such for tax purposes (unlike Maréchaux, where the taxpayer also had an effective guarantee that a security deposit made by it would accrete to the loan amount by the loan maturity date).

The description of the evidence in this case (based on a 10-day trial) also indicates more clearly than in Maréchaux the circular and vacuous nature of the background transactions (other than the generation of fees), so that the charity in question in fact received virtually no benefit from the supposed gifts.

Neal Armstrong.  Summary of Kossow v. The Queen, 2012 TCC 325 under s. 118.1(1) - "total charitable gifts."