Citation: 2010 TCC 236
Date: 20100505
Docket: 2008-2888(IT)I
BETWEEN:
DOREEN TUAR,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Campbell J.
[1]
These appeals were part
of a group of charitable donation appeals involving almost forty different
Appellants. By the time they were scheduled for hearing, many of the Appellants
had withdrawn their appeals. In the end, only the appeals of Richard Kwame
Adomphwe (2008-3722(IT)I), George W. Scott (2008-1657(IT)I), Stephonie
Scott (2008-1704(IT)I) and Doreen Tuar (2008-2888(IT)I) proceeded to
hearing.
[2]
The appeals of Doreen
Tuar involve her 2002, 2003, 2004, 2005 and 2006 taxation years. In computing
tax payable in each of these taxation years, the Appellant claimed a gross
non-refundable tax credit in respect of charitable donations as follows:
|
Year
|
Charity
|
Amount
|
|
2002
|
CanAfrica International Foundation
(“CanAfrica”)
|
$ 8,000.00
|
|
2003
|
CanAfrica
|
$ 8,350.00
|
|
2004
|
CanAfrica
|
$ 8,358.00
|
|
2005
|
CanAfrica
|
$10,025.00
|
|
2006
|
PanAfrican Canadian Multicultural Centre
|
$ 4,274.00
|
|
2006
|
Bible Teaching Ministries
|
$ 4,310.00
|
[3]
The reassessments, in
respect to the 2002 and 2003 taxation years, were completed beyond the normal
reassessment period pursuant to subsection 152(4) of the Income Tax Act
(the “Act”).
[4]
The Appellant testified
that she was introduced to a charity, CanAfrica, through a pamphlet that had
been delivered to her residence. The pamphlet contained the contact information
of Mr. Ambrose Danso-Dapaah, who operated ADD Accounting. Mr. Danso-Dapaah
was later criminally charged with fraud in November, 2007 as a result of an
investigation by Canada Revenue Agency (“CRA”). In 2008, he entered a guilty
plea to fraud charges.
[5]
The Appellant
investigated the charity through the internet and since her family had been
involved in assisting charities in their homeland, Guyana, since coming to Canada in 1989, they decided to pool their resources and
support the charity described in the pamphlet.
[6]
After receipt of the
pamphlet, the Appellant met with Mr. Danso-Dapaah in 2002 to obtain more
information. Mr. Danso-Dapaah informed her that he was an employee of CRA and
that he was also working part-time to support charitable relief in Africa through an organization, CanAfrica. Although the
Appellant had donated to charities in her homeland, she never claimed any
amounts on her returns prior to doing so in 2002. She stated that even after
her return was filed in 2002 by Mr. Danso-Dapaah, she contacted CRA to ensure
that the charity was registered and that the receipts were in order.
[7]
Since meeting with Mr.
Danso-Dapaah in 2002, the information for her returns, as well as her donations,
were either picked up at her home or sent through the mail to ADD Accounting. She
did not attend at the tax preparer’s offices. During these years, one of her
sisters resided with her. The sister required care and was in and out of the
hospital on many occasions. The Appellant and her sister shared a rental unit
with their brother, who helped the Appellant to care for the sister while he
was trying to commence his own business. The Appellant works at CIBC. In the
years under appeal, her gross income ranged between $27,602.00 in 2002 and
$35,914.00 in 2006. The Appellant claimed that she also provided tutoring to
students but did not charge any fees for the tutoring in these taxation years.
[8]
The Appellant
introduced a large number of receipts and various shipping documents for both cash
and containers of items sent to Guyana in the years prior to 2002. She claimed
that she and her eight siblings pooled their resources to provide these
donations to their homeland prior to 2002, as well as to the charities of
Ambrose Danso-Dapaah in the years under appeal.
[9]
For the taxation years
2002 to 2005, her returns were completed by ADD Accounting. In 2007,
Payless Accounting completed the Appellant’s return for 2006 as she received
information of a change of address of ADD Accounting. Ambrose Danso-Dapaah sold
his clientele list to George Gudu, who had been employed as a part-time
tax preparer for ADD Accounting. Mr. Gudu opened his own tax preparation
business at a new location and operated under the name, Payless Tax.
[10]
Although Mr. Gudu did
not testify in Ms. Tuar’s appeals, he was called as a witness in the other
appeals that proceeded as part of this group of appeals. He apparently was
privy to the scheme promoted by Ambrose Danso-Dapaah of issuing false receipts
for amounts substantially greater than the amounts paid by the clientele. He continued
this practice at Payless Accounting. Mr. Gudu has also been charged and, under
a plea agreement with CRA, is to plead guilty some time this spring.
[11]
To support the cash amounts
which the Appellant claims she donated, she produced a copy of a cheque dated
April 10, 2003 made out to Ambrose Danso‑Dapaah in the amount of
$500.00 (Exhibit A-4). She stated that he would not accept this cheque because
he told her he was going to Africa to personally deliver money to the charity
and it would take too long for her cheque to clear at the bank prior to his
departure. She provided him with a money order dated April 15, 2003 for
$500.00 (Exhibit A-3) to replace this cheque. This was also evidence, the
Appellant claimed, that Ambrose Danso-Dapaah wanted only cash and not other
forms of money exchange. She produced her banking passbook showing a cash withdrawal
of $800.00 on January 31, 2002 which she claimed she would have given to
Ambrose Danso-Dapaah because she never made large cash withdrawals for anything
else.
[12]
In every year except
2006, her donation consisted of cash, together with property items, being
primarily jewellery. A platinum engagement ring was donated and formed part of
the total amount of the $8,000.00 donation in 2002. She estimated this ring
would be worth approximately $5,000.00, although it had not been appraised. In
2003, one of the items donated was an 18 carat gold necklace, plus another item
for which she had no recollection. In 2004, pieces of gold jewellery, such as
rings and broken gold bands, brought with her from her homeland, were donated.
In 2005, another ring, from a second broken engagement, was donated. None of
the jewellery was appraised and the Appellant had no receipts from Ambrose
Danso-Dapaah acknowledging these donations of property.
[13]
Mr. Kofi Debrah, a
so-called pastor, testified that he was “involved” with both Ambrose Danso-Dapaah
of ADD Accounting and later George Gudu of Payless Tax on behalf of his
charity, Bible Teaching Ministries, registered as a charity in 2005. He
confirmed his “arrangement” with these two individuals respecting the
collection from clients by these tax preparers of 10 per cent of the face value
of receipts, which had been issued in blank by Bible Teaching Ministries. This
10 per cent amount was then split between the tax preparers and Mr. Debrah or,
if Mr. Debrah is to be believed, his charity. In exchange, he provided booklets
of signed but otherwise uncompleted receipts from Bible Teaching
Ministries. He identified the receipt dated January 29, 2007, issued to the Appellant
for $4,310.00 by Bible Teaching Ministries. He confirmed he received 60
per cent of 10 per cent of the face value listed on the receipt. On cross‑examination,
Mr. Debrah, despite his acknowledgement of this arrangement in direct
examination and his limitless supply of blank but signed receipts to these tax
preparers, surprisingly maintained, under oath, that he was “unaware” of a
scheme to defraud both CRA and individuals like the Appellant.
[14]
Deborah Edyvean, the CRA
investigator, detailed the information, including the copies of clients’ tax
returns, obtained from the CANTAX software program on the computers and
equipment seized from the Payless Tax offices, as well as Mr. Gudu’s
personal residence and his van. In addition, receipt booklets, from various
charities, some completed and some pre-signed and sealed but otherwise in
blank, were seized. Letterhead from some charities and correspondence were
seized.
[15]
Ms. Edyvean also referred to the
invoices attached to the returns in respect to the preparation of the tax
returns issued to the Appellant in 2003, 2004 and 2005. The tax preparation fee
statement to the Appellant included references to the donation receipt number
and the face value amount of the receipt but listing only payment of approximately
10 per cent of that amount made in the year that the return was prepared and
filed.
[16]
Both Ms. Edyvean and Barbara
Lovie, also a special investigator with CRA, determined that Ambrose
Danso-Dapaah and George Gudu were participants in a scheme whereby inflated
receipt amounts were being utilized by these tax preparers and purchased by the
clientele for 10 per cent of the inflated amount. She confirmed that Ambrose
Danso-Dapaah entered a guilty plea in 2008 and that George Gudu, among others,
has been charged with fraud. All of the charities involved have now had their
charitable registrations revoked. According to the evidence of Ms. Lovie,
the quantum of false donation receipts issued by Mr. Danso-Dapaah was
approximately $21.6 million with $6.2 million in non‑refundable tax
credits claimed.
[17]
The main issue in these appeals is
whether the Appellant made any gifts to registered charities that would entitle
her to claim non-refundable tax credits pursuant to section 118.1 of the Act.
In addition, a second issue arises as to whether the receipts issued by these
charities can qualify as validly issued receipts in prescribed form pursuant to
subsection 118.1(2) of the Act and Regulations 3500 and 3501(1) of the Income
Tax Regulations (the “Regulations”). Since the present appeals
involve two taxation years, 2002 and 2003, which were assessed beyond the
normal reassessment period, a third issue arises in determining whether the
Minister of National Revenue (the “Minister”) was entitled to reassess the
Appellant after the normal reassessment period in respect to these two taxation
years.
[18]
It is the Respondent’s position
that the Appellant did not make a true gift as contemplated by the common law
but rather “purchased” donation receipts from her tax preparer which contained
grossly inflated face value amounts.
[19]
The leading case on the meaning of
“gift” is The Queen v. Friedberg, 92 D.T.C. 6031, where Linden J.A.,
at page 6032, defined “gift” as:
… [A] gift is
a voluntary transfer of property owned by a donor to a donee, in return for
which no benefit or consideration flows to the donor …
[20]
Respondent counsel referred to the
case of Coombs et al v. The Queen, 2008 D.T.C. 4004, where Woods J., at
paragraph 15, referred to the elements of this definition in the following
manner:
[15] …
First, it is necessary that the gifted property be owned by the donor, second
that the transfer to the charity be voluntary, third that no consideration flow
to the donor in return for the gift, and fourth that the subject of the gift be
property, which distinguishes it from providing services to the charity. These
elements reflect the general notion that a taxpayer must have a donative intent
in regards to the transfer of property to the charity.
[21]
In Webb v. The Queen, 2004
TCC 619, [2004] T.C.J. No. 453, Bowie J., at paragraph 16, described this
“donative intent” to transfer property to a charity as follows:
[16] Much has been written on the subject of
charitable donations over the years. The law, however, is in my view quite
clear. I am bound by the decision of the Federal Court of Appeal in The
Queen v. Friedberg, among others. These cases make it clear that in order
for an amount to be a gift to charity, the amount must be paid without benefit
or consideration flowing back to the donor, either directly or indirectly, or
anticipation of that. The intent of the donor must, in other words, be entirely
donative.
[22]
The reassessments for
the 2002 and 2003 taxation years were made outside the normal reassessment
period. For these years to be re-opened, the Respondent has the onus of establishing
that a misrepresentation occurred in each year that was attributable to
neglect, carelessness, wilful default or fraud, in accordance with subparagraph
152(4)(a)(i) of the Act. Both CRA investigators concluded that the
information and records obtained from the seized equipment supported the
existence of a scheme in which clients of ADD Accounting and Payless Tax were
paying only 10 per cent of the face value of donation receipts. The
investigators concluded that these receipts were in essence being purchased.
Several tax preparers have been charged in this regard. The Appellant’s 2002
and 2003 CANTAX returns were part of the seized records. The 2003 return
contained an attached invoice which listed $8,350.00 as being the amount of the
receipt which the Appellant claimed as a donation in that year. However, the
invoice also reflects that an amount of only 10 per cent or $835.00 was
actually paid by the Appellant. Although the 2002 return did not contain an
invoice, according to the evidence of Barbara Lovie, it was not unusual to find
some returns that did not have an accompanying invoice.
[23]
Both of these returns
were E-filed and the Appellant testified that she looked at only the front page
of the returns but did not review the information in either return as to
accuracy or completeness. In both years, she stated that her donations were
partly cash and partly goods-in-kind, being jewellery. She made no effort to
have, what appears to be, rather expensive jewellery independently appraised.
She simply relied on the tax preparers to establish the values and she did not
bother to review her returns. The only evidence of cash donations in 2002 and
2003 that she could provide was a bank passbook showing an $800.00 cash
withdrawal in early 2002 and a money order for $500.00 payable to Ambrose
Danso-Dapaah. There was nothing except the Appellant’s evidence to show that
the $800.00 actually went to Ambrose Danso-Dapaah and if, in fact, it did it is
suspicious that it is exactly 10 per cent of the face value amount of the
receipt for that year. The $500.00 money order dated in April, 2003 does not
support a conclusion that amounts greater than the 10 per cent of the face
value of the receipts were being paid to ADD Accounting.
[24]
The Appellant’s actions
support a finding of neglect and carelessness, although I will not go so far as
to say they constitute wilful blindness or fraud. I must take into account that
the Appellant is an employee of a bank and should know the importance of
maintaining proper records to support such claims. She would have been well
prepared to provide a well-documented paper trail of her donations to Guyana over the years prior to 2002 if those had been at
issue, so the idea of supporting records was not a novel concept to her.
Although I believe the Appellant made a misrepresentation attributable to
neglect and carelessness that enables CRA to reopen these two taxation years,
if her argument is that she relied on her tax preparers to properly file these
returns and ensure their correctness, I do not believe she can succeed in this
regard either. Chief Justice Bowman in Snowball v. The Queen,
97 D.T.C. 512, makes it clear that a taxpayer may not escape the consequences
of subparagraph 152(4)(a)(i) by blaming the negligence or carelessness on one’s
tax preparer. It is the Appellant’s return and she has a responsibility to
review the return for accuracy and completeness. Consequently, the Respondent
has satisfied the onus, on a balance of probabilities, that these otherwise
statute-barred years should be reopened. This shifts the onus to the Appellant
for all of the taxation years under appeal in respect to the remaining issues.
[25]
Unfortunately, the
Appellant has provided no proof, except her testimony, that she paid the cash
amounts and gifted the property she alleges in the full face value of the
receipts. At the very least, some of her family members could have testified on
her behalf to corroborate her evidence that they all pooled their cash in these
years and that she claimed the donation receipts on her returns. She freely
handed over, apparently very valuable, items of jewellery over the years,
without receipts, to an individual that introduced himself through a pamphlet
dropped off at her house. Although she may have placed some reliance on the
fact that Ambrose Danso‑Dapaah was a CRA employee at the time, she
came across as an intelligent individual who has a responsible banking
position. When I look at all of the circumstances, I simply do not believe she
continued to hand over cash and valuable jewellery year after year to an
individual whose only credentials were that he was a CRA employee plus ran a
business as a tax preparer. She never got receipts throughout the years nor did
she obtain any independent advice on the value of the property.
[26]
I must also consider
the other factors which came out in evidence. The donation amounts are large
considering her income in these years. She was also the caregiver for an
apparently very ill sister during all of these years. She recognized the value
of maintaining detailed records relating to money transfers and shipments of
property to her homeland in years prior to 2002. The $800.00 cash withdrawal
appeared to be a guesstimate on the Appellant’s part that it would be for a
donation because she otherwise never withdrew large amounts and again, as I
have previously concluded, it is highly suspicious that it is exactly 10 per
cent of the face value of the 2002 receipt. The money order for $500.00 in
April 2003 cannot be considered proof that she donated the full amount of the
receipt. If anything, it is evidence only of a payment towards the 10 per cent amount
paid about the time her return would have been completed in 2003, when the
receipt was being used for the 2002 taxation year. The invoice attached to the
2003 CANTAX return clearly supports the scheme which the investigation
uncovered. Similar invoices are attached to the 2004 and 2005 returns. These
invoices contradict the testimony of the Appellant and she was unable to
provide any credible explanation for their existence.
[27]
When I take all of
these factors into consideration and weigh them based on a balance of
probability, the evidence adduced by the Respondent supports my conclusion that
the Appellant paid no more than 10 per cent in cash or goods in respect to the
grossly inflated face value of the receipts that accompany her returns. The
so-called essential element of “donative intent”, as described in the caselaw,
is not present.
[28]
In respect to the
Respondent’s alternative argument, that is, the receipts do not meet the
requirements under subsection 118.1(2) of the Act and Regulations 3500
and 3501, the receipts, with the exception of the 2006 receipt to PanAfrican
Canadian Multicultural Centre, are deficient as they do not contain the
prescribed information.
[29]
According to subsection 118.1(2),
a gift is not to be included as a charitable gift unless it is accompanied by a
receipt for the gift that contains certain prescribed information. That
prescribed information is set out clearly and in specific detail at Regulation
3501(1). In particular, Regulation 3501(1)(h)(i) states that the receipt
shall show:
(h) the amount
that is
(i)
the amount of a cash donation, or
…
[30]
With respect to donations that
include gifts of property, other than cash, Regulation 3501(1)(e.1) states that
every official receipt shall contain the following:
(e.1) where
the donation is a gift of property other than cash
(i) the day on which the donation was received,
(ii) a brief description of the property, and
(iii) the name and address of the
appraiser of the property if an appraisal is done;
[31]
The receipts for the
taxation years 2002 to 2005 (Exhibit R-1) are deficient because:
1. they do not specify
the day on which the alleged donation was made; and
2. they do not contain
a brief description of the property, primarily jewellery, that the Appellant
allegedly gifted.
One of the two receipts in the 2006 taxation year, in
respect to Bible Teaching Ministries, did not specify the day on which the
alleged donation was made.
[32]
This missing receipt information
is critical to the success of a taxpayer relying upon receipts to claim a tax
credit where gifts of property are made. It is only reasonable that such
information be included on this type of receipt in order to prevent taxpayers from
donating worthless property or property of a much lesser value while claiming a
much greater value in order to obtain a tax benefit. It is also why there is a
specific reference to an appraisal of such property. Although it is not a requirement
that an appraisal be completed, by incorporating this reference, it implies
that where there is doubt of the value of donated property, a taxpayer may be
required to produce the proof of such value through an appraisal or by other
acceptable means.
[33]
I subscribe to the
remarks by Tardif J. of this Court in Plante v. The Queen, [1999] T.C.J.
No. 51, on the importance of issuing appropriate receipts. Tardif J. stated at
paragraphs 46-48 of his Judgment:
[46] The
requirements in question are not frivolous or unimportant; on the contrary, the
information required is fundamental, and absolutely necessary for checking both
that the indicated value is accurate and that the gift was actually made.
[47] The
purpose of such requirements is to prevent abuses of any kind. They are the
minimum requirements for defining the kind of gift that can qualify the
taxpayer making it for a tax deduction.
[48] If the
requirements as to the nature of the information that a receipt must contain
are not met, the receipt must be rejected, with the result that the holder of
the receipt loses tax benefits. Accordingly, even though a taxpayer may have
made a gift of a painting, he or she cannot claim the potential deduction if
the appraisal and the receipt issued for the gift do not comply with the
requirements of the Act and the Regulations made thereunder.
[34]
Most of these receipts
are deficient in the requisite information prescribed by the Act and the
Regulations and must, therefore, be rejected due to non-compliance.
[35]
For these reasons, the
appeals for the 2002, 2003, 2004, 2005 and 2006 taxation years are dismissed
without costs.
Signed at Ottawa, Canada, this 5th day of May 2010.
"Diane Campbell"
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