Morrison – Tax Court of Canada finds that the taxpayers had the burden of disproving the Minister’s assumptions about their gift tax shelter about which they knew virtually nothing

The taxpayer, who participated in a charitable gifting program that generated receipts well in excess of the amount contributed by him, had no familiarity with how the program “worked.” He argued that since he (and the other participants) did not have knowledge of most of the factual matters assumed by the Minister in assessing him, as a matter of procedural fairness he should not be required to demolish such assumptions and the Minister should instead bear the burden of proof with respect to them. In rejecting this submission, Owen J stated:

The Appellants consciously chose to participate in the Programs with little or no knowledge of what went on behind the curtain, so to speak. In such circumstances, it is not unfair to the Appellants to allow the Minister to assume what went on behind the curtain.

… By participating in the Programs without further inquiry, the Appellants accepted the risk that the facts behind the curtain were not what they expected them to be.

Before so disposing of the taxpayers’ arguments on burden of proof, with the result that there was no credit for the donated certificates, Owen J essentially noted that he agreed with the comments of Webb JA in Sarmadi on this topic, and indicated that comments of L’Heureux Dubé J in Hickman to a different effect (respecting the burden potentially shifting to the Minister) “were obiter dicta.

However, Owen J went on to find that the taxpayer could get a tax credit for the cash that he had donated. He did not receive any collateral benefit under the non-cash part of the program (it was essentially bogus), nor was the cash donation to be characterized as a fee for participating in the program.

Neal Armstrong. Summaries of Morrison v. The Queen, 2018 TCC 220 under General Concepts – Onus and s. 118.1(1) – total charitable gifts.