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Citation: 2004TCC661
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Date: 20041110
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Docket: 94-2544(IT)G
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BETWEEN:
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GILLES ROBICHAUD,
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Appellant,
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and
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HER MAJESTY THE QUEEN,
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Respondent.
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[OFFICIAL ENGLISH TRANSLATION]
REASONS FOR JUDGMENT
Tardif J.
[1] This is an appeal from an
assessment made under the Income Tax Act (the "Act")
concerning the 1989, 1990 and 1991 taxation years. The appeal
deals with the following three questions:
· Was there a
genuine donation of certain property?
· If it was a
genuine donation, did the amounts on the receipts correspond to
the fair market value (the "FMV") of the property in question at
the time the property was transferred?
· Lastly,
were the penalties imposed under subsection 163(2) of the Act for
1989, 1990 and 1991 justified?
[2] To make and justify the
reassessments in question, the Minister of National Revenue (the
"Minister") assumed the following facts:
(a) in his income
tax return for the 1989 taxation year, the Appellant claimed, as
a charitable donations credit, an amount of $2,089 with respect
to the property (stamps) purportedly "given" to the Fondation
Amérindienne Tecumseh;
(b) in his income
tax return for the 1990 taxation year, the Appellant claimed, as
a charitable donations credit, an amount of $5,190 with respect
to the property (stamps) purportedly "given" to the Fondation
Amérindienne Tecumseh;
(c) in his income
tax return for the 1991 taxation year, the Appellant claimed, as
a charitable donations credit, an amount of $6,870 with respect
to the property (stamps) purportedly "given" to the Fondation
Amérindienne Tecumseh;
(d) the Appellant
did not genuinely donate of any of that property in 1989, 1990 or
1991;
(e) the Appellant
did not have animus donandi to give that property to the
Fondation Amérindienne Tecumseh;
(f) the
Appellant bought a tax deduction each year;
(g) the Appellant
only sought to obtain an undue tax advantage for the 1989, 1990
and 1991 taxation years since each year the transaction was
conditional upon receiving a receipt for an amount larger than
the amount he had to spend to obtain it;
(h) in addition, the
value declared by the Appellant for 1989, 1990 and 1991 for the
property in question, of which the description provided in the
documents submitted by the Appellant was not admitted, was not
attributed by an independent expert and was not, in any case, the
fair market value of the property in question;
(i) the
receipts submitted by the Appellant do not comply with section
3501 of the Income Tax Regulations;
(j) the
Appellant is therefore not entitled, for 1989, 1990 and 1991, to
any charitable donations credit with regard to the property in
question;
(k) the Appellant
did not fill in Schedule 3 on his income tax returns concerning
the gains realized on the disposition of listed personal
property;
(l) the
Appellant, knowingly or under circumstances amounting to gross
negligence, made, participated in, assented to or acquiesced in
the making of a false statement or omission in his income tax
returns for the 1989, 1990 and 1991 taxation years and as a
result the income tax that would have been payable if it had been
established based on the information provided in his returns
would have been $503.96, $1,312.54 and $1,751.90 less,
respectively, than the income tax actually payable for the 1989,
1990 and 1991 taxation years; (no confirmation in the file)
(m) the penalties
accordingly imposed on the Appellant under subsection 163(2) of
the Income Tax Act amount to 50% of that tax differential,
namely, $251.98, $656.27 and $875.95, respectively, for the 1989,
1990 and 1991 taxation years.
[3] The Appellant admitted the
statements in paragraphs (a), (b), (c), and (k); he denied all
the others, specifically, (d), (e), (f), (g), (h), (i), (j), (l),
and (m).
[4] Only the Appellant, a chartered
accountant (CA), testified in support of his appeal.
[5] The Appellant, who has been truly
fond of stamps since a very young age, had gathered a
significant number of them over the years, which he
considered to be a collection. Many members of his family had
made it their duty to gather stamps for him; with time and the
help of his family and friends, he had accumulated so many that
he considered himself an amateur stamp collector.
[6] In parallel with this hobby, he
was interested in tracing his ancestors to build his family tree;
when he learned that some of his ancestors were of Amerindian
origin, he became interested in that community and wanted to help
them.
[7] Due to a lack of time and
interest, and with his fondness for stamps waning, he apparently
then decided to help the Fondation Amérindienne Tecumseh
by donating part of his collection to the foundation in three
different donations during 1989, 1990 and 1991.
[8] In consideration for the donations
to the Fondation Amérindienne Tecumseh, he received three
receipts in the amounts of $2,089.70, $5,189.81 and $6,870. The
value of the donations indicated on the receipts was established
based on the international catalogue "Scott" for the years in
question. Those were the key elements of the evidence submitted
by the Appellant.
[9] To show the FMV of the stamps that
he gave to the Fondation Amérindienne Tecumseh during the
1989, 1990 and 1991 taxation years, the Appellant essentially
stated that the FMV had been determined based on the information
in the "Scott" catalogue. He was consistent. He did not enlist
the aid of any experts or stakeholders; he repeated that, in his
view, the "Scott" catalogue was an appropriate and satisfactory
reference tool for determining the FMV.
[10] He also added that he has very little
or no knowledge about tax matters. Throughout the years, his
professional career had moved away from pure accounting; for some
years now, he has dedicated himself more to administration than
to accounting.
[11] As to his experience with income tax
returns, he took care of his own, those of some family members
and a few friends, but this work in general was not very
significant.
[12] The cross-examination of the Appellant
revealed some interesting and very relevant information. First,
the Appellant was not a very informed collector; even he
described himself as an amateur.
[13] For example, he was not able to explain
the meaning of the letter J in the stamp descriptions that he
gave to the Fondation even though that is very basic for a true
collector. The letter J means that the stamps are used by Canada
Post to stamp mail without sufficient postage. The Appellant was
more a gatherer of stamps than a true collector.
[14] He stated that he had re-gained his
fondness for his hobby following a meeting with Jean Allaire, a
co-worker, who was very interested in stamps and even had a
business in this field called "Zimo."
[15] The Appellant became interested in
stamps once again; that interest primarily developed as part of
his relationship with his co-worker, an accountant at the same
company.
[16] In response to the questions designed
to determine the extent of his knowledge of stamp collecting and
whether he had discussions, took steps, organized meetings,
visits or exchanges or made purchases or sales with other
collectors, both amateur and professional, he essentially stated
that he occasionally went to Mr. Allaire's and that he had
once visited his booth at an exhibition.
[17] The cross-examination also revealed
that the stamps given in the three donations for 1989, 1990 and
1991 were acquired from the business Zimo, owned by his co-worker
and friend, Jean Allaire.
[18] Was this true for all the stamps given?
It was not possible to determine that specifically. However, it
was for the large majority; some stamps, the quantity of which
could not be determined, were presumably obtained in trades for
stamps he already had.
[19] However, the evidence in that regard
was so incomplete that it was appropriate to accept that the
large majority of the stamps given in the three donations came
from Jean Allaire; to acquire those stamps, the Appellant paid
$503.96, $1,312.54 and $1,751.90, plus the applicable taxes.
[20] With regard to the matter of the stamps
given in the three donations and the price paid, the Appellant
answered all the questions in a very evasive manner. However, the
Respondent's evidence clarified the matter, all the more because
two of the three payments were made at practically the same time
as the receipts were issued.
[21] To establish the FMV of the stamps in
respect of which the three receipts submitted by the Appellant
were issued, the Respondent enlisted the help of Maurice
Valentin, an expert in philately. Mr. Valentin, who has been
working full time in this field for more than 40 years, the last
20 of which in Canada, prepared and submitted a report on the
results of his analysis (Exhibit I-13).
[22] As the Appellant acknowledged Mr.
Valentin's expertise, the Court confirmed the expert
qualification.
[23] Accordingly, Maurice Valentin
testified as an expert. He explained and described certain
fundamental rules for appraising stamps, both for dealers and for
the collectors themselves.
[24] As he was not able to examine the state
of the stamps in question, he referred to the very detailed
descriptions prepared as part of the three donations. He was then
able to determine and assess the method used for attributing the
value indicated on the receipts.
[25] The substance of the expert testimony
dealt with a critique of the various guides on the subject.
[26] First, he pointed out a very important
element, namely, that the stamps given up were not a collection,
but rather a batch of stamps, therefore losing a significant part
of their potential value. He explained that true collectors
usually have objectives based on countries, themes or other
characteristics making it possible to build true collections. For
the expert, a collector is a person who gathers or tries to
gather stamps from the same family, the same era or the same
country, where it is often a matter of a specific theme. The
Appellant's approach essentially consisted in gathering all sorts
of stamps without any homogeneity.
[27] According to Mr. Valentin, the stamps
given in the three donations were of no interest to a collector.
They could be sold in essentially commercial transactions because
the potential purchaser would only have one interest, namely, to
make a profit by selling them in small batches.
[28] There was no connection between the
various stamps, which told him that they were dealing with an
"inventory" of stamps and not a collection.
[29] In such case, the stamps are of no
interest to a collector. Only a dealer may be interested in those
stamps, as long as he only spends a very small fraction of the
price that may be listed in the different catalogues hoping to
resell them at a profit while selling them for less than the
value indicated in the different guides or catalogues.
[30] In light of Mr. Valentin's testimony,
it appears that the Appellant was clearly not a high-level
collector. He was interested in stamps as an amateur in that he
was more concerned with the size of his inventory than with the
quality, rarity or distinctiveness of certain stamps.
[31] Furthermore, the evidence in no way
established that he had the knowledge, classifications,
specialties, etc. He undoubtedly took pleasure in gathering the
stamps and quantity was his primary concern.
[32] Mr. Valentin provided several concrete
examples to illustrate his statements. His comments and
explanations were clear and simple. His conclusions resulted from
a reliable and well-documented analysis.
[33] Although reliable, professional and
detailed, that analysis cannot lead to irrefutable conclusions.
However, when the work is done in a professional manner and is
consistent with the rules of the art, the conclusions drawn
cannot be disregarded for essentially intuitive reasons.
[34] In the case at bar, there were no
meaningful criticisms of Mr. Valentin's work. On the contrary,
the Appellant acknowledged his experience and expertise in the
matter. He acknowledged having learned interesting and very
valuable things from the testimony.
[35] For those reasons, I have no ground to
disregard or disallow the expert's conclusions. Accordingly, I
concur with Mr. Valentin's opinion as to the FMV; the FMV of the
three batches of stamps that were donated to the Fondation
Amérindienne Tecumseh was established as follows:
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Mr. Valentin's conclusions
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Batch
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FMV accepted
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$280.48
$216 to 433
$500.62 to 671.25
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I
II
III
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$280
$433
$671
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[36] Is the Scott catalogue or guide an
appropriate and reliable reference for determining the FMV of
stamps? The answer is clearly no.
[37] Relying on the Scott guide, the
Appellant stated and repeated that the amount indicated on the
different receipts obtained from the Fondation
Amérindienne corresponded to the FMV of the stamps that he
had donated.
[38] There is no sufficient or satisfactory
guide, catalogue or register for determining the FMV of property.
That type of reference exists for a number of consumer goods such
as cars, motorcycles, trailers, trucks, etc. Many also exist for
property that is collected like coins, dishes, stamps, watches,
pens, firearms, etc. Those guides, catalogues or reference tools
are essentially tools that give some idea of the possible value.
They are not definitively sufficient for attributing a FMV at a
given time. They are, at most, a reference that prevents one from
making totally arbitrary decisions.
[39] Depending on the reliability, the
market, the interest and the circulation, certain guides may have
a better rating, maybe even better credibility and may be based
on actual transactions such as the price obtained at an auction.
For the collector, there are dozens of details that can have a
significant impact on the FMV; for example, the condition of the
property, its purity, its authenticity, etc., are very important
aspects for a true collector.
[40] The sales at specialized auctions are
also data that may prove to be interesting and relevant; those
transactions have the advantage of providing actual data as
opposed to just theoretical data. However, a rich amateur without
any knowledge on the matter can raise the bidding at the auction
considerably because of pride, boastfulness, specific emotions,
etc., which as a result vitiates or distorts the FMV of
property.
[41] To better understand that reality, it
should be noted that the FMV is generally the price that a buyer
free from any constraint, specific emotion or need is prepared to
pay to acquire the property from its owner equally free from any
pressure or influence of any kind.
[42] The Respondent argued that, first, a
donation implies that the donor has to be the owner of the object
at the time of the donation, otherwise the donation cannot have
taken place, implying that the Appellant did not own the stamps
at in respect of which the three receipts were issued.
[43] Although the evidence of ownership of
the stamps was not absolute or beyond a reasonable doubt, on the
balance of probabilities, the stamps were indeed the property of
the Appellant.
[44] Some came from his own inventory, but
the number had not been established; the large majority came from
Zimo, a business operated by a co-worker who was also
apparently a friend.
[45] For any transfer of ownership of
property to take place, there has to be consent, specific
identification of the object of the transfer and finally payment
in consideration. In the case at bar, the property was very
clearly identified and described in detail; the Appellant paid
much less than the amount indicated on the receipts, but he did
pay something.
[46] The requirements applicable to the
three receipts, which are set out in section 3500 and subsections
3501(1) and (1.1) of the Income Tax Regulations, read as
follows:
3500. In this Part,
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"other recipient of a gift" means a person, to
whom a gift is made by a taxpayer, referred to in any of
subparagraphs 110.1(1)(a)(iii) to (vii), paragraphs
110.1(1)(b) and (c), subparagraph
110.1(3)(a)(ii), paragraphs (c) to (g)
of the definition "total charitable gifts" in subsection
118.1(1), the definition "total Crown gifts" in subsection
118.1(1), paragraph (b) of the definition "total
cultural gifts" in subsection 118.1(1) and paragraph
118.1(6)(b) of the Act;
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...
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"official receipt" means a receipt for the
purposes of subsection 110.1(2) or (3) or 118.1(2), (6) or
(7) of the Act, containing information as required by
section 3501 or 3502
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...
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3501. (1) Every official receipt issued by a
registered organization shall contain a statement that it is
an official receipt for income tax purposes and shall show
clearly in such a manner that it cannot readily be
altered,
(a) the name
and address in Canada of the organization as recorded with the
Minister;
(b) the
registration number assigned by the Minister to the
organization;
(c) the
serial number of the receipt;
(d) the place
or locality where the receipt was issued;
(e) where the
donation is a cash donation, the day on which or the year during
which the donation was received;
(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;
(f) the day
on which the receipt was issued where that day differs from the
day referred to in paragraph (e) or (e.1);
(g) the
name and address of the donor including, in the case of an
individual, his first name and initial;
(h) the
amount that is
(i) the amount
of a cash donation, or
(ii) where the
donation is a gift of property other than cash, the amount that
is the fair market value of the property at the time that the
gift was made; and
(i) the
signature, as provided in subsection (2) or (3), of a responsible
individual who has been authorized by the organization to
acknowledge donations.
(1.1) Every official receipt issued
by another recipient of a gift shall contain a statement that
it is an official receipt for income tax purposes and shall
show clearly in such a manner that it cannot readily be
altered,
(a) the name
and address of the other recipient of the gift;
(b) the
serial number of the receipt;
(c) the place
or locality where the receipt was issued;
(d) where the
donation is a cash donation, the day on which or the year during
which the donation was received;
(e) 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;
(f) the day
on which the receipt was issued where that day differs from the
day referred to in paragraph (d) or (e);
(g) the
name and address of the donor including, in the case of an
individual, his first name and initial;
(h) the
amount that is
(i) the amount
of a cash donation, or
(ii) where the
donation is a gift of property other than cash, the amount that
is the fair market value of the property at the time that the
gift was made; and
(i) the
signature, as provided in subsection (2) or (3.1), of a
responsible individual who has been authorized by the other
recipient of the gift to acknowledge donations.
[47] The receipts submitted are certainly
not ideals; however, they contain enough details on the
fundamental aspects to allow for adequate verification of all the
relevant elements quickly and easily.
[48] Furthermore, the Minister obtained a
very detailed and specific description of the stamps that were
given to the Fondation Amérindienne Tecumseh in three
donations. Furthermore, the availability of all the details also
allowed the Respondent to commission an expert who prepared his
report based essentially on the description provided by the
Appellant.
[49] From the appraisal or the appraiser,
the Minister learned that it was a reputable catalogue which was
undoubtedly a classic for all those interested in stamps.
[50] The very strict requirements set out in
the Regulations do not make it possible to draw irrefutable
conclusions; their purpose is essentially to make available all
the elements necessary for a review to ensure reasonableness and
avoid abuses.
[51] The Appellant's file was audited as
part of what seems to have been a special project. Claiming that
he had no knowledge of the scheme from which some individuals
presumably tried to benefit, the Appellant described himself as
being honest, upright and very compliant with the Act; he stated
that had not hidden anything or made false statements. He
vigorously defended the transparency of his actions and stated
that he had always acted in good faith.
[52] The Appellant's testimony, his
reactions to the numerous comments from the Court, his behaviour
during the cross-examination of the expert, his observations to
all the stakeholders and, finally, the extensive observations
made during his closing statement are elements that discredit or
at the very least weaken the theory that he knowingly or under
circumstances amounting to gross negligence, made, participated
in, assented to or acquiesced in the making of a false statement
or omission in his income tax returns for the 1989, 1990 and 1991
taxation years.
[53] The Appellant's professional training
as a chartered accountant would have normally made him more
suspicious, more vigilant and especially more meticulous in the
handling of his personal tax affairs.
[54] Not only did the Appellant fail to use
reasonable care, he was also rather naïve. He was an
accountant. As such, he was an accounting professional, which
includes the obligation to know and understand the fundamental
principles of taxation.
[55] Were the penalties imposed on the
Appellant justified? Subsection 163(2) of the Act reads as
follows:
(2) False
statements or omissions. Every person who, knowingly, or
under circumstances amounting to gross negligence, has made or
has participated in, assented to or acquiesced in the making of,
a false statement or omission in a return, form, certificate,
statement or answer (in this section referred to as a "return")
filed or made in respect of a taxation year for the purposes of
this Act, is liable to a penalty of the greater of $100 and 50%
of the total of
(a) the amount, if any, by which
(i) the amount, if any, by which
(A) the tax for the year that would be payable by the person
under this Act
exceeds
(B) the amounts that would be deemed by subsections 120(2) and
(2.2) to have been paid on account of the person's tax for
the year
if the person's taxable income for the year were computed
by adding to the taxable income reported by the person in the
person's return for the year that portion of the person's
understatement of income for the year that is reasonably
attributable to the false statement or omission and if the
person's tax payable for the year were computed by
subtracting from the deductions from the tax otherwise payable by
the person for the year such portion of any such deduction as may
reasonably be attributable to the false statement or omission
exceeds
(ii) the amount, if any, by which
(A) the tax for the year that would have been payable by the
person under this Act
exceeds
(B) the amounts that would be deemed by subsections 120(2) and
(2.2) to have been paid on account of the person's tax for
the year
had the person's tax payable for the year been assessed on
the basis of the information provided in the person's return
for the year,
...
[56] To decide whether a taxpayer was
grossly negligent, Strayer J. stated in Venne v. Canada,
[1984] F.C.J. No. 314 (Q.L.), 84 D.T.C. 6247 (FCTD):
"Gross negligence" must be taken to involve greater neglect
than simply a failure to use reasonable care. It must
involve a high degree of negligence tantamount to intentional
acting, an indifference as to whether the law is complied with or
not.
[57] Can it be argued that the Appellant's
behaviour was equivalent to wilful blindness? I do not believe
so; the practice of accounting is also an exercise that often
makes it possible to draw a considerable tax advantage from the
characterization of certain transactions. Some examples are the
numerous planning strategies that often have a considerable
impact on the tax burden.
[58] In the case at bar, the Appellant did
not ask himself any questions; he paid for the stamps that he
donated within a few hours in return for a receipt the amount of
which was considerably higher than the amount spent, trusting
that the amount on the receipt corresponded to the FMV since it
was supported by the Scott catalogue.
[59] He did not make up the FMV. The FMV was
established without any intervention on his part. It was not a
fake donation. The property was identifiable. The fact that he
benefited considerably from the donation does not automatically
establish bad faith or wrongful conduct. To acquire the stamps
that he donated to the Fondation Amérindienne Tecumseh, it
seems on the balance of probabilities that the Appellant spent
the following amounts: $503.96 for the 1989 donation, $1,312.54
for 1990 and $1,751.90 for 1991.
[60] According to the expert, Mr. Valentin,
the stamps given in the three donations had a FMV of $280 for the
1989 donation, $433 for the 1990 donation and $671 for the 1991
donation.
[61] The Appellant could not benefit from a
receipt on which the amount indicated was higher than the FMV
regardless of the amount he spent, which in the case at bar did
not at all correspond to the FMV. Consequently, the Appellant
could not claim to be entitled to more than the FMV established
by Mr. Valentin based on the details indicated above.
[62] Lack of care, naïveté or
seeking a tax benefit is not sufficient to establish the
validity of the penalties set out in subsection 163(2).
[63] The preparation of the file and the
work necessary for its presentation to the Court undoubtedly
accounted for most of the time devoted to this file; the penalty
component did not require a special workload considering that the
penalties primarily resulted from the interpretation of the facts
primarily used for the assessment, I therefore grant costs to the
Respondent.
[64] For all those reasons, the appeal is
allowed and the assessments are referred back to the Minister for
reconsideration and reassessment given the fact that the
Appellant donated the sets of stamps for which the FMV at the
time of the donation was $280 for the 1989 taxation year, $433
for the 1990 taxation year and $671 for the 1991 taxation year;
as to the penalties, they are set aside, with costs in favour of
the Respondent.
Signed at Ottawa, Canada, this 10th day of November 2004.
Tardif J.
Translation certified true
on this 28th day of February 2005
Aveta Graham, Translator
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