REASONS
FOR JUDGMENT
Favreau J.
[1]
This is an appeal under the informal procedure
from a reassessment made by the Minister of National Revenue (the “Minister”) under the Income Tax Act, R.S.C.
1985, c. 1 (5th Supp.) as amended (the “Act”)
dated October 13, 2009 concerning the 2008 taxation year of the appellant.
[2]
The issue is whether the appellant is entitled
to tax credits in respect of charitable donations in the amounts of $3,500 and
$4,000 purportedly made during the 2008 taxation year.
[3]
In determining the appellant’s tax liability for
the 2008 taxation year, the Minister relied on the following assumptions of
fact:
a)
the Appellant claimed charitable donations of
$3,500 for alleged donations to Africanadian Mediation Community Services (“AMCS”) and $4,000 for alleged donations to Operation
Save Canada Teenagers (“Operation”) for the 2008
taxation year;
b)
the Appellant reported net income of $49,762 for
the 2008 taxation year;
c)
the amount of the alleged 2008 donations
constituted 15% of the Appellant’s reported net income for the 2008 taxation
year;
d)
the Appellant failed to provide receipts to the
Minister for the charitable donation tax credits claimed for the 2008 taxation
year that contained the information prescribed by section 3501 of the Income
Tax Regulations;
Africanadian Mediation Community Services
e)
prior to December 11, 2010, AMCS was a
registered charity;
f)
AMCS failed to maintain adequate books and
records;
g)
AMCS did not devote all of its resources to
charitable purposes and activities;
h)
AMCS did not issue receipts in accordance with
the Income Tax Act ;
i)
AMCS’ registration as a charity was revoked for
cause by the Minister effective December 11, 2010;
j)
the Appellant’s alleged donations to AMCS in the
2008 taxation year, consisted of $1,500 cash and $2,000 in-kind donations;
k)
the receipt from AMCS issued to the Appellant
did not state the dates on which the in-kind gifts were purportedly donated;
l)
the value of the in-kind gifts donated did not
reflect the description of the goods purportedly donated;
m)
the receipt did not include the name and
internet address of the CRA and did not state that it was an official receipt
for income tax purposes;
n)
the receipt did not contain a signature of the
person who issued the receipt;
o)
AMCS did not receive donations from the
Appellant;
p)
the Appellant did not transfer any property
(cash or non-cash) to AMCS in the 2008 taxation year or in any of the five
immediately preceding taxation years;
q)
if the Appellant did transfer non-cash
properties to AMCS in the 2008 taxation year, the fair market value of the
alleged non-cash properties was nominal;
Operation Save Canada Teenagers
r)
Operation was a registered charity effective
July 6, 2006;
s)
Operation failed to maintain adequate books and
records;
t)
Operation did not devote all of its resources to
charitable purposes and activities;
u)
Operation did not issue receipts in accordance
with the Income Tax Act;
v)
Operation’s registration as a charity was
revoked for cause by the Minister effective January 8, 2011;
w)
the Appellant’s alleged donations to Operation
in the 2008 taxation year, consisted of $1,200 cash and $2,800 in-kind
donations;
x)
the receipt from Operation issued to the
Appellant did not state the dates on which the in-kind gifts were purportedly
donated;
y)
the value of the in-kind gifts donated did not
reflect the description of the goods purportedly donated;
z)
Operation did not receive donations from the
Appellant;
aa)
the Appellant did not transfer any property
(cash or non-cash) to Operation in the 2008 taxation year or in any of the five
immediately preceding taxation years;
bb) if the Appellant did transfer non-cash properties to Operation in
the 2008 taxation year, the fair market value of the alleged non-cash
properties was nominal; and
. . .
[4]
As set out in paragraph 7 of the Reply to the
Notice of Appeal, the Minister also relied on the following additional material
facts:
a)
Operation Save Canada’s Teens (“Teens)” was not a registered charity in 2008; and
b)
the Appellant did not transfer any property
(cash or non-cash) to Teens in the 2008 taxation year or in any of the five
immediately preceding taxation years.
[5]
The appellant testified at the hearing. She
explained that it was the first year in which she gave money to charitable
organizations. In 2008, she worked as quality supervisor for Maple Leafs Foods
and she reported a net income of $49,762 in her tax return. The total amount of
the tax deducted as per her T-4 was $9,599.57 and she made contributions to the
Canada Pension Plan in the amount of $2,289.98 and paid premiums to the
Employment Insurance program in the amount of $859.65. Her net after-tax disposable
income during that year was approximately $37,000 and $3,000 per month.
[6]
The appellant left her parents’ house when she
got married. She then moved into a one-bedroom apartment. At the end of 2008,
she moved into a two-bedroom apartment with her husband. The monthly rent for
the apartment was between $1,100 and $1,200 and was paid by the appellant and
by her husband on a 50/50 basis. She estimated that their cost of living was
approximately $300 per week. They owned a car and lived about 5 or 6 kilometers
away from her workplace. She had to reimburse a debt from school costing her
$60 per month. Her husband had no debt from school. She did not provide any
additional financial information concerning her husband.
[7]
The appellant confirmed that she claimed in her
2008 tax return, donations amounting to $7,500 to two charitable organizations,
Africanadian Mediation Community Services (“AMCS”) and Operation Save Canada
Teenagers (“Operation”). The donation to AMCS totalled $3,500 which consisted of $1,500 in
cash and $2,000 in in-kind. The donation to Operation totalled $4,000 which
consisted of $1,200 in cash and $2,800 in in-kind.
[8]
The appellant explained that she heard about
AMCS through a friend from Ghana who prepared her tax returns. All that she
knew about AMCS was that the organization was helping people in Africa. She did
not know the location from where the organization operated.
[9]
The appellant explained that her cash
contribution was calculated by her husband, based on a percentage of her
assets. She was withdrawing $300 per month from her bank account and put that
money aside for donation purposes. The in-kind donation to AMCS consisted of
household items, used clothing, shoes, laptop computer, books and magazines.
[10]
According to the appellant, the cash donation to
AMCS was a one-time donation given to the person who came to pick up the in-kind
donation in June 2008. She said that she received a receipt from the
organization at the end of the year. She did not know by whom her goods were
appraised.
[11]
The appellant explained that a friend
recommended that she supports Operation. She used the monthly withdrawals from
her bank account to make her cash donations. The money from her monthly
withdrawals was kept by a pool coordinator at home to help members of the pool
when they are in need. The appellant maintained that she could use the money to
do whatever she wanted. She made her cash donation to Operation on only one
occasion but she did not specify the date on which the cash donation was made,
where and to whom it was made. She alleged to have made many in-kind donations
to the Operation; she simply had to call the Operation and they would send
someone to pick-up the goods. The appellant did not prepare an itemized list of
goods she gave. The appraisal of the goods given by the appellant was conducted
by the organization for the preparation of the tax receipt.
[12]
The appellant alleged that the original receipts
that were issued by the charitable organizations were provided to the Canada
Revenue Agency (“CRA”) when she filed her tax return for 2008. She could not file as
evidence a copy of the receipt from AMCS. Paragraphs 6(k) to 6(n) of the Reply
to the Notice of Appeal clearly show that the CRA had possession of the receipt
from AMCS at one point. As far as the receipt from Operation is concerned, the
appellant filed a copy of it with her notice of objection.
[13]
Mr. Salman Jafri, a litigation officer of CRA,
testified at the hearing and filed extracts from Canada Gazette Part I showing
that the charity registration of Africanadian Mediation and Community Services
has been revoked effective December 11, 2010 and that the charity registration
of Operation Save Canada’s Teenagers has been revoked effective January 15,
2011.
Analysis
[14]
Section 118.1 of the Act allows an
individual to claim a tax credit for charitable gifts made to a registered
charity. Paragraph 118.1(2)(a) provides that the making of the gift must
be proven by filing a receipt containing prescribed information. The provision
reads:
(2) A gift shall not be included in the
total charitable gifts, total Crown gifts, total cultural gifts or total
ecological gifts of an individual unless the making of the gift is evidenced by
filing with the Minister
(a) a
receipt for the gift that contains prescribed information;
. . .
[15]
The prescribed information required to be
included in an official receipt is listed in subsection 3501(1) of the Income
Tax Regulations (the “Regulations”) which states in the version applicable
to the 2008 taxation year:
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 gift 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, the individual’s 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
is made;
(h.1) the amount of the advantage, if any, in respect of the
gift;
(h.2) the eligible amount of the gift;
(i)
the signature, as provided in subsection (2) or
(3), of a responsible individual who has been authorized by the organization to
acknowledge donations; and
(j)
the name and Internet website of the Canada
Revenue Agency.
[16]
For the following reasons, I have concluded that
the receipts provided by the appellant do not contain all of the information
required by the Regulations and, for this reason alone, the appeal must
be dismissed. I have also concluded that, even if the receipts had conformed to
the Regulations, the appellant failed to prove, on a balance of
probabilities, that she made the donations at issue.
[17]
The appellant filed a receipt from AMCS with her
2008 tax return. No copy of the receipt was filed as evidence in Court but the
CRA had possession of it and observed that the receipt (a) did not state the
dates on which the in-kind gifts were purportedly donated (b) the value of the
in-kind gifts donated did not reflect the description of the goods purportedly
donated (c) did not include the name and internet address of the CRA and did
not state that it was an official receipt for income tax purposes and (d) did
not contain a signature of the person who issued the receipt as required by
paragraphs 3501(1)(e.1), (i) and (j) of the Regulations.
[18]
The receipt from Operation did not state the
dates on which the in-kind gifts were purportedly donated and their monetary
value did not reflect the description of the goods purportedly donated, as
required by paragraph 3501(1)(e.1) of the Regulations.
[19]
Since none of the receipts provided to the
appellant by AMCS and Operation contain all of the prescribed information, they
do not meet the requirements of subsection 118.1(2) of the Act, and for
this reason, the appellant’s claims for charitable gift credits cannot be
allowed.
[20]
The onus is on the appellant to prove that she
made the alleged donations to AMCS and Operation in 2008. The standard of proof
to be applied is on a balance of probabilities. This means that she must show
that it is more probable than not that she made the donations at issue. In my
view, the appellant did not meet her standard of proof.
[21]
The only proof submitted by the appellant that
she had made the donations at issue was her testimony and the incomplete receipts
issued by AMCS and Operation.
[22]
The evidence presented by the appellant fell
short of showing that she made the donations to AMCS and Operation. Her
testimony was vague and unreliable. She had no connection with the charitable
organizations. She did not know from where the organizations operated nor what
they were really doing with the donations except in general terms. She simply
stated that she was introduced to AMCS by a friend who prepared her tax returns
and who had since returned to Ghana. She was similarly introduced to Operation
by another friend. She did not provide any information concerning this latter
friend. None of these friends were called as a witness to corroborate her
evidence.
[23]
The appellant said that she withdrew the cash
from her bank account to make the donations but no bank statement showing the
monthly cash withdrawals was filed as evidence in Court. The amount of the cash
donations were based on a formula calculated by the appellant’s husband. I draw
a negative inference from the failure of the appellant to call her husband to
confirm how the cash donations were determined and when they were made.
[24]
The appellant’s testimony was also vague
concerning the place where the cash was kept. It is not entirely clear if all
the money from her monthly withdrawals was kept by a pool coordinator or if a
part of it was kept by her at home.
[25]
The appellant’s testimony was particularly
deficient because she could not remember the exact dates on which she made the
cash or in-kind donations. She mentioned that they were made in the month of
June 2008 but this was not corroborated by any verbal or documentary evidence.
She was not able to give the name of the persons to whom she supposedly
remitted the cash and in-kind donations and she did not call any witnesses from
the charitable organizations to testify as to the contributions made nor did
she submit any other evidence concerning the appraisal of the goods that she
donated.
[26]
The appellant did not prepare, at the time the
donations were made, an itemized list of the goods donated with a short
description of the goods and their estimated value. She relied entirely on the
charitable organizations to estimate the value of the goods donated. I find it hard
to believe that she did not want to keep goods having a total value of $4,800.
[27]
In analyzing the appellant’s ability to make the
alleged cash contributions, I am led to believe that the amounts are
substantial compared to her net after-tax disposable income for the 2008
taxation year. The cash donations of $2,700 represented 7.3% of her net after-tax
disposable income for that year.
[28]
Considering the amounts of the alleged donations
made by Mrs. Iqbal, I would have expected her to pay more attention to
recording these donations on an ongoing basis, to make more comprehensive
inquiries on the people administering these organizations and on how the
donations were being used to carry out their charitable activities.
[29]
For all the above reasons, taken collectively, I
found that the appellant has failed to prove, on a balance of probabilities,
that she made the donations at issue.
[30]
The appeal is dismissed.
Signed at Montreal, Canada
this 15th day of December 2015.
“Réal Favreau”
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