AMENDED
REASONS FOR JUDGMENT
Jorré J.
[1]
In his 2007 and 2008 taxation years the
appellant claimed charitable credits in respect of charitable donations in the
amount of $20,000 and $16,890, respectively. The Minister of National Revenue
denied both of these charitable deductions. The appellant appeals from the
Minister’s assessments denying the deductions.
[2]
The respondent takes the position that no
charitable gifts were made. In the alternative, the respondent argues that the
appellant did not provide receipts containing the information required pursuant
to section 3501 of the Income Tax Regulations.
[3]
This case is primarily one of fact and the issue
of whether the charitable donations were made turns on credibility.
[4]
In assessing the 2007 and 2008 taxation years,
the Minister relied, inter alia, on the following assumptions of fact:
a) The
Mega Church International ("Mega Church") was a registered charity in
the 2007 taxation year and for a portion of the 2008 taxation year;
. . .
e) Mega
Church's registration as a charity was revoked for cause by the Minister
effective August 23, 2008;
f) Operation
Save Canada's Teenagers ("Operation") was a registered charity in the
2008 taxation year;
. . .
k) the
Appellant did not claim any charitable donations in any years prior to the 2007
taxation year;
l) the
Appellant claimed charitable donations of $20,000 for the 2007 taxation year,
which consisted of purported donations to Mega Church;
m) the
Appellant reported net income of$126,620 for the 2007 taxation year;
n) the
amount of the alleged 2007 donations constituted 16% of the Appellant's
reported net income for the 2007 taxation year;
o) the
alleged 2007 donation to Mega Church consisted of cash;
p) Mega Church did not receive cash donations from the Appellant;
q) the
Appellant did not transfer any property (cash or non-cash) to Mega Church in
the 2007 taxation year or in any of the five immediately preceding taxation
years;
. . .
s) the
Appellant claimed charitable donations of $16,890 for the 2008 taxation year,
which consisted of purported donations of $10,270 to Mega Church and $6,620 to
Operation;
t) the
Appellant reported net income of $145,799 for the 2008 taxation year;
u) the
amount of the alleged 2008 donations constituted 12% of the Appellant's
reported net income for the 2008 taxation year;
v) the
alleged 2008 donations to Operation and Mega Church consisted of cash;
w) Operation and Mega Church did not receive cash donations from
the Appellant;
x) the
Appellant did not transfer any property (cash or non-cash) to Operation or Mega
Church in the 2008 taxation year or in any of the five immediately preceding
taxation years;
. . .
z) the
Appellant failed to provide to the Minister receipts for the charitable donation
tax credits claimed for the 2007 and 2008 taxation years that contained the
information prescribed by section 3501 of the Income Tax Regulations.
[Emphasis added.]
[5]
The appellant is an engineer. He is married and
has four children. The oldest was born in 1989 and the youngest was born in
1994. In 2007 the youngest was 13 and the oldest 18.
[6]
The appellant testified that he made the
charitable donations claimed in cash.
[7]
He testified that his faith requires him to give
a tithe of 10% of his income and that over and above that he gives offerings to
the church. This was his way of life before coming to Canada and it continued
after he arrived here. As soon as he earned money he felt that he was indebted
for the tithe. He stated that:
The way I perceive and the way I have been
brought up is that my tithe doesn’t belong to me; it is a debt, so I take out
my tithe first and foremost from every -- of my earnings. As soon as I have
earned something, it becomes a debt that I have pay to God, so I take that out
irrespective of what is in my account . . . .
[8]
The appellant filed Exhibit A-1, a listing he
prepared. The first page of Exhibit A-1 is a listing that shows the dates and
amounts of cash withdrawals used to make his cash donations in 2007 to Mega
Church International. There were 28 donations ranging from $100 to the largest
one on June 27, 2007 in the amount of $4,518.
[9]
The second page of the exhibit shows the dates
and amounts in 2008. There were 12 dates on which there were donations to
Mega Church. These ranged from $300 to $2,000. There were 14 dates on which
there were donations to “Operation Save Canada Teens”; these ranged from $300 to $800.
[10]
The appellant filed Exhibits A-16 and A-17.
These are his bank statements for 2007 and 2008; I note that it appears that a
couple of pages showing the last part of two months are missing. The appellant
filed them to corroborate that he made cash withdrawals on the dates shown in
Exhibit A-1 listing the donations and dates.
[11]
The appellant’s practice was that he would give
money when he went to church on Sunday. He would get the money earlier in the
week from an automatic bank machine or from a teller. He never got the money on
Saturday or Sunday but the withdrawal could be on any of the other five days of
the week.
[12]
Then, on Sunday he would put the money into a
preprinted envelope on which he wrote his name, his address, the amount and the
date. He would then put his envelope in the basket passed around at offering
time during the church service.
[13]
Letters from the two charities confirming the
donations were filed by the appellant as exhibits, as were receipts for the
donation.
[14]
I regret, but for the reasons that follow, I
cannot accept the appellant’s testimony that he made donations to the two
charities. As a result, he has not displaced the Minister’s assumption that
there were no donations.
[15]
I set out below some of the considerations which
lead me to this conclusion; taken individually, these considerations might not
lead to the same conclusion. However, when taken together, the conclusion is
inescapable that the appellant’s evidence is simply not plausible.
[16]
Specifically:
(a) It
is uncommon for individuals to donate large amounts of money in cash. It is
also uncommon to carry around large amounts of cash. In the course of two years,
11 of the claimed donations made by the appellant were of $1,000 or more. Two
of the 11 were for over $2,000 and one of the 11 was for $4,518. The amounts
were withdrawn from the bank account between two and five days before the
Sunday church service.
(b) In
the course of the two years, there were also three weeks where the appellant
made withdrawals twice in the same week for the purpose of obtaining cash to
make donations. I recognize that the appellant testified that, because of trips
and other reasons, he often had to obtain cash some days in advance. However,
that does not explain why there would be weeks where there would be withdrawals
on two different days.
(c) These
large claimed donations totalling $20,000 in the first year and $16,890 in the
second year take place at the same time as the bank account is continually
swinging in and out of an overdraft position. Indeed, overdraft interest is
paid in at least 22 of the 24 months in the two years. In the two years
the statements show 17 occasions where there were NSF charges.
(d) One
does not expect people to make significant donations at the same time as they
are in overdraft from time to time.
(e) The
appellant testified that for him a tithe was a debt from the moment he earned
anything and that he had felt the obligation to pay tithes well before he came
to Canada. If I accepted the statement that he felt very strongly about the
commitment to paying tithes, that could potentially explain the cash donations
occurring even though it would, some of the time, put the appellant in a
position where he had to pay relatively modest amounts of overdraft interest.
(f) I
am unable to accept that the appellant felt such a strong obligation to pay
tithes. He arrived in Canada in late 2003 and it is not surprising that in 2003
there were no charitable deductions claimed by the appellant in his 2003 tax
return. However no donations were claimed by the appellant in his 2004, 2005
and 2006 tax returns. In 2004 his total income was quite low and I could
understand that he might not make donations. However, in 2005 and, even more
so, in 2006, he started to have a more significant total income and I cannot
reconcile the absence of any charitable donation claims with such a strong commitment
to paying tithes.
(g) In
addition, after the two years in issue there was a dramatic fall‑off in
the appellant’s charitable contributions until 2012 when again he claimed a
significant charitable contribution in his tax return. In 2009, no charitable
deduction was claimed. In 2010 and 2011, about $4,000 and $3,500, respectively,
were claimed, amounts of somewhat less than 5% of his income.
(h) The
appellant explained this drop-off in donations as being the result of his being
“discouraged” from giving as a result of all the questions he received from the
Canada Revenue Agency. I have difficulty reconciling this with the importance
he says he attaches to tithing.
(i) The
appellant states that the amount of $4,517.99 described as “Cash Money #532” shown as a debit on June 27,
2007 in his bank account was a withdrawal to fund a donation of $4,518 on the
following Sunday. The respondent argued that I should conclude that it was not
a cash withdrawal but, instead, a payment to a company called “Cash Money”, a payday loan lender.
(j) I
am not prepared to conclude that this was a payment to “Cash Money”, a payday
loan lender. However, after carefully examining the bank statements where,
elsewhere, cash withdrawals are shown as “w/d” or
as “cash withdrawal” (or the first few letters
of “withdrawal”), I am satisfied that the amount
of $4,517.99 on June 27, 2007 is not a cash withdrawal. Indeed, when one
looks at other entries on the bank statement, the reasonable inference is that
it is a direct payment, presumably by debit card, from the bank account and, as
a consequence, it could not have funded a charitable donation of $4,518 four
days later.
(k) The
$4,518 gift was much larger than any other.
(l) The
appellant said that he earned income from consulting as well as his salary from
his employer. He made this particular gift because he had been paid for
consulting and the cheque had cleared; the gift was probably around 10% of what
he received.
(m) This
last statement is not plausible. In 2007, the appellant reported salaried
earnings of just under $144,000, a gross business income of $16,000 and a net
business loss of $1,400.
If the appellant had received his entire gross consulting income for the year
shortly before making the donation, the $4,518 donation would amount to 30% of
that gross income from business in circumstances where he lost money from
consulting in that year.
(n) The
appellant attended Mega Church until August 2008; the rest of his family
attended a different church. He testified that it was at Mega Church that
Operation was recommended to him. As a result, in 2008 he started to alternate
his giving between Mega Church and Operation. Whether he gave to Mega Church or
Operation, he would follow the same practice: getting money in advance, putting
money in a preprinted envelope and giving it at offering time during the service.
(o) He
stopped giving to Mega Church after August 2008 after he learned that there
were issues regarding Mega Church’s charitable registration; he also stopped
attending Mega Church and attended another church with his family.
(p) Although
Operation had been recommended by Mega Church, he nonetheless continued to give
to Operation after August. He would go to Mega Church, which he no longer
attended, to make his cash donations to Operation. I find this difficult to
accept.
(q) Exhibits
A-10 and A-11 were letters from the charities obtained by the appellant to
confirm his donations. I am satisfied that they cannot be the result of
independent information held by the two charities. The letters show the dates
and amounts of the donations made in 2008. They correspond with page 2 of Exhibit
A-1 and show the donations as being on the same day as the withdrawals. This is inconsistent with the
appellant’s testimony that he gave on Sundays. The charities could not have
known when the cash was withdrawn.
[17]
Given my conclusion that there were no
donations, the appellant is not entitled to any charitable credits.
[18]
In addition, given my conclusion, it is
unnecessary for me to deal with the respondent’s argument that the receipts do
not provide all the information required by section 3501 of the Income Tax
Regulations and, accordingly, no charitable amount may be deducted because
of paragraph 118.1(2)(a) of the Income Tax Act.
[19]
The appeal is dismissed.
These amended reasons for judgment
are issued in replacement of the reasons for judgment signed on July 9, 2015.
Signed at Ottawa,
Canada, this 20th day of July 2015.
“Gaston Jorré”
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