Starflex – Court of Quebec finds that the Quebec exemption of income, which is Treaty-exempted by Canada, did not permit a deduction under Art. XXI, para. 7 of the Canada-U.S. Convention for donations made to U.S. charities

Art. XXI, para. 7 of the Canada-U.S. Convention provides (subject to conditions) that a gift by a Canadian with U.S.-source income to a qualifying U.S. charity is to be treated the same as one to a registered Canadian charity. Pokomandy JCQ (after noting that a province is not bound by the Convention) found that a Quebec provision, which exempted income for Quebec purposes if it also was exempted under one of Canada's treaties, did not require Quebec to provide donation deductions for gifts to U.S. charities, stating that Art. XXI, para. 7 "confers tax relief and not exemption from tax on income otherwise taxable in Canada."

At the trial opening, the taxpayer sought to add an argument that the donations were deductible as promotional expenses (see Olympia).  In refusing to allow this alternative claim as one which contradicted the original claim, Pokomandy JCQ stated:

One cannot claim to have donated a sum and alternatively to have expended it in earning income from a business.

Neal Armstrong. Summaries of Emballages Starflex Inc. v. ARC, 500-80-019409-110, under Treaties, Art. 21 and s. 18(1)(a) –income-producing purpose.