Citation: 2013 TCC 138
Date: 20130603
Docket: 2012-2556(IT)I
BETWEEN:
CHRISTIANAH ASHAOLU,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Angers J.
[1]
The appellant's 2006
taxation year was reassessed by the Minister of National Revenue (Minister) who
disallowed a claim for charitable donations for an amount of $5,950. The
appellant duly objected and referred in her notice of objection to a charitable
organization known as the Centre for Multicultural Training and Documentation
(Multicultural) but did not disclose the actual amount in dispute. In her
notice of appeal, she relied on her notice of objection which was attached as
her reasons for the appeal.
[2]
In the respondent's
reply, the assumption of facts relied upon by the Minister refers only to
Multicultural as the charity at issue. The amount claimed is $5,950 to which
the appellant agreed. It is the Minister's position that no donation was made
by the appellant to Multicultural in cash or in kind and if in kind, the fair
market value of non-cash properties was nominal. The final assumption is that
the appellant failed to provide to the Minister a receipt for the charitable
donation claimed for the 2006 taxation year that contained the information
prescribed by section 3501 of the Income Tax Regulations.
[3]
It became clear during
the hearing of this appeal that the $5,950 donation to Multicultural was in the
amount of $3,450 for the 2006 taxation year of the appellant and that the
difference, namely $2,500, was for another donation to the Islington Evangel
Centre, another charitable organization. There were also two other small
donations of $50 and $40 respectively for a total of $6,040. Only the two small
donations were allowed.
[4]
Given the pleadings,
the notice of objection, the notice of confirmation and the letter from the Canada
Revenue Agency to the appellant of February 16, 2012, it becomes clear that it
refers to a donation of $5,950 to Multicultural. Both parties was under the
impression that the donation to Multicultural was for $5,950 and it was that
particular donation that was under appeal. The auditor testified that she saw
the receipts for the first time on the morning of the trial but she did have a
copy of the Multicultural receipt of the appellant. It was obtained when she
audited Multicultural in 2008. The assumptions relied upon were incorrect and
the pleadings should have been amended to reflect the correct amount or the
correct donations that were disallowed.
[5]
In my opinion, the only
issue before this Court is the charitable donation to Multicultural and for the
amount specified on the receipt, namely $3,450. The pleadings were not amended
and although the appellant should have known better as far as the amount is
concerned, I do not find that the validity of the charitable donation to the
Islington Evangel Centre to be an issue properly plead in this appeal.
[6]
In 2001, the appellant
bought various pieces of furniture for her home in Brampton. It consisted of
tables, beds, sofas and blinds. In 2004, she decided to sell her home and some
of her furniture was put in storage. In January 2005, she moved in her new home
and some pieces of her furniture did not match and her sons did not want their
bunk beds back. The furniture remained in storage.
[7]
On a visit to the
African supermarket in 2004, she saw an advertisement from Multicultural asking
people to make donations. In 2006, she communicated with Multicultural to offer
her furniture for sale. She informed the representative that she had paid
between $7,000 and $8,000 for her furniture. The representative verified their
value on E-Bay and informed the appellant it was worth around $5,900. She
agreed to that amount and she testified that half that amount was paid to her
in cash and the other half with a cheque. She later testified that instead of a
cheque, she got the receipt for $3,450.
[8]
The appellant provided
the Court with the original receipt she received from Multicultural which is
the same one the auditor obtained through her audit of Multicultural in 2008.
It reads that it is an official receipt for tax purposes; it has the charitable
organization's registration number but contains an error. The letters are RP
but should be RR. The appellant's name is written but without her initial. The
donation type reads clothing, furniture and office desks. The date of the donation
reads Jan. Dec. 2006 and the amount is $3,450. The receipt is dated December
23, 2006. The address for Multicultural is different from the address of its
registration.
[9]
Multicultural was
audited in 2008. The audit has revealed that Multicultural was not engaged in
any of the activities under which it had obtained a registration certificate.
In 2006, it issued 71 receipts for charitable donations, 68 of which were for
clothing, furniture and office desks. Multicultural did not keep proper books
or records of their activities and most of the goods in kind were shipped to Cameroun. The auditor found that all receipts issued for donations in kind were deficient
in that they did not contain the prescribed information under subsection
3501(1) of the Income Tax Regulations including the appellant's receipt.
[10]
The issues here are
whether there was a gift of property in kind to Multicultural by the appellant
in 2006 and if there was, what is its value and if a gift was in fact made, was
the receipt made in accordance with the Income Tax Regulations?
[11]
The appellant's version
of the facts with regard to the sale of her furniture to Multicultural is
difficult to reconcile with the amount shown on the receipt she obtained from
Multicultural. She testified that she had sold her furniture to Multicultural
for $5,900 and was paid half that amount in cash and the other half by cheque.
She later said that the other half turned out to be the receipt she obtained
from Multicultural which turned out to be more than half of the $5,900 agreed
price.
[12]
In addition to this
inconsistency, the appellant was unable, throughout her testimony, to establish
with certainty what she actually paid for the furniture when purchased. She
testified that it was between $7,000 and $8,000 but provided no corroborative
evidence to support it. She was also unable to establish the fair market value
of her furniture when she sold them to Multicultural. The only evidence on that
topic is what she was told by the Multicultural representative who was not called
to testify. It is a strange coincidence that the value of $5,900 given by the
representative for the furniture is the same amount that was originally thought
to be the value of the donation. In any event, I find the evidence on the value
of the furniture to be unreliable for the purpose of establishing a fair market
value for the donated furniture. There was no appraisal made as to the value of
the donated furniture by an independent person. I therefore agree with the
respondent that it can only be of a nominal value.
[13]
The tax credit for a
donation by a taxpayer to a charitable organization is provided in subsection
118.1(3) of the Income Tax Act. It is based on the taxpayer's total
charitable gifts which term is defined in subsection 118.1(1) as follows:
Definitions – In this section,
"total
charitable gifts", of an
individual for a taxation year, means
the total of all amounts each of which is the fair market value of a gift (other
than a gift the fair market value of which is included in the total
Crown gifts, the total cultural gifts
or the total ecological gifts of the individual for the
year) made by the individual in the year or in any of the five
preceding taxation years (other than in a year for which a deduction under
subsection 110(2) was claimed in
computing the individual's taxable income) to a qualified done, to
the extent that the amount was not included in determining an amount
that was deducted under this section in computing the individual's
tax payable under this Part for a preceding taxation
year;
[14]
That definition
therefore provides that it is based on the fair market value of the gift. The
absence of evidence in the form of an appraisal report means that the
appellant's appeal cannot succeed. I subscribe to Justice Webb's, formerly of
our Court, decision in Le v. Canada, [2011] T.C.J. No. 233 where he said
at paragraph 15:
In
any event, the Appellant's appeal was based on
his story that he "donated" $46,500 ($3,000 in cash and $43,500 in
goods) in 2005 to strangers who appeared at his door and who represented
charities about which the Appellant apparently knew very little. Even if I were
to accept that the Appellant made this gift (which I do not accept), the
absence of an appraisal report would mean that the Appellant could not succeed
in relation to the amount claimed for the goods. The tax credit for a donation
by an individual to a charitable organization is provided in subsection
118.1(3) of the Income Tax Act and is based on the
individual's total gifts. The definition of "total gifts" in
subsection 118.1(1) of the Act provides that one of
the limiting amounts is the individual's total charitable gifts. The definition
of "total charitable gifts" also in subsection 118.1(1) of the Act provides that it is based on the fair market
value of the gift (or gifts). Without any evidence with respect to the
fair market value of the items, the Appellant cannot succeed in any event in
relation to the $43,500 claimed for the goods.
[15]
The assessment is
referred back to the Minister for reassessment in that the amount disallowed as
a claim for charitable donations with regard to Multicultural should be in the
amount of $3,450 instead of $5,950. The appeal is therefore allowed in part.
Signed at Ottawa, Canada, this 3rd day of June 2013.
“François Angers”
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