Christie, A.C.T.C.C J.:—This appeal is governed by the informal procedure prescribed by section 18 and following sections of the Tax Court of Canada Act.
The appellant in this appeal is the fourth appellant in a series of appeals pertaining to the deductibility of charitable gifts allegedly made to the Don- elian Museum of Oriental Art (“the museum”) which was a registered charity under the Income Tax Act, R.S.C. 1952, c. 148 (am. S.C. 1970-71-72, c. 63) (the "Act") at the time relevant to the appeal. The first appeal was that of Gardner v. Canada, [1993] 2 C.T.C. 2480 (T.C.C.). In that appeal, as in the appeal at hand, Gustave Tasch, John Donelian and the museum were important factors. Reasons for judgment in Gardner are attached. The evidence of Maria T. Giallonardo in that appeal is relevant to the appeal at hand. So is the evidence of Arthur C. Payne in that appeal, to the extent that it did not focus on the actions of Bruce Thomas Gardner. Another person who played an important role in this appeal and who was an appellant along with his wife, Beverley, in the series is Jeffrey R. Ball. Also attached is copy of the reasons for judgment in Beverley Ball v. Canada, [1993] 2 C.T.C. 2475 (T.C.C.).
The appellant is an obstetrician. In his return of income for 1986 he sought to deduct $18,000 as a charitable gift made to the museum. The gift was a" Rare South Persian Quashqa’i rug, late 19th Century". Dr. Hawrylyshyn had purchased the artifact from Tasch for $3,400.
In reassessing the Minister of National Revenue disallowed the deduction and imposed a penalty under subsection 163(2) of the Act. On the appeal to this Court the appellant is seeking to deduct only the $3,400. In addition, he is challenging the imposition of the penalty.
Since 1983 or 1984 the appellant has engaged Jeffrey Ball to prepare his returns of income. He also referred to Ball for general financial advice where no questions about tax were involved. He“ relied heavily” on Ball with respect to what gave rise to this appeal.
In the fall of 1986 the appellant became aware, through colleagues, about donations to the museum. He said:
Prior to entering into any such endeavour the first time I heard about it I asked Jeff specifically to have him investigate fully the nature of the museum, its legitimacy and what the transaction would involve.
He received “assurance” about the proposed tax transaction. In mid or late December 1986 Ball told him a carpet was available. On the last Monday or Tuesday of 1986, i.e. December 29 or 30, 1986, the appellant met with Tasch and Ball at Ball’s home. It was not a condition of attending that the appellant would buy a carpet and donate it to the museum. Prior to the meeting he was told to bring $3,400 in cash, which he did. The appellant had not met Tasch prior to the meeting and has not met with him since.
The appellant noted:
At the meeting, again which lasted about two hours, a lot of material was shown to me which in essence, if you want to call it a sales pitch or what not, authenticated the museum.
There was no reason to suspect that there was anything illegitimate about the museum. He went on:
During the meeting, again because I was not totally familiar with the process, I believe Gustave explained to me how the donation process works. What happened. I would give him the cash, there would be a donation receipt issued and Jeff would get it and basically explained how the process would work as far as how you made donations to a charitable organization. I left and that was the end of it.
The $3,400 was given to Tasch for the artifact previously described and Tasch delivered it to the museum. The appellant never saw the museum. It was left to Ball to complete the transaction and secure a receipt for the sale and a receipt for tax purposes.
In the fall of 1987 the appellant received a call from Revenue Canada. Members thereof were investigating the museum and wanted to interview him. He cooperated fully with the investigators.
Arthur C. Payne of Revenue Canada testified on behalf of the respondent. He identified a copy of the receipt numbered 104 dated December 29, 1986, issued to the appellant by the museum for $18,000 regarding the artifact contributed to it by the appellant. The investigators were unable to trace the acquisition of the artifact by Tasch. Also placed in evidence is a document which Payne received from Jeffrey Ball. The letterhead reads: ” RARE ANTIQUE ORIENTAL RUGS Old Master Paintings, Gustave Tasch, 2051 Deer Run Avenue, Burlington, Ontario, Canada L7M 2E7 Phone: (416) 336-2103”. It is dated April 5, 1986, and is addressed to the appellant. It is signed by Tasch. The body of the letter reads: “Acquired as your agent in the USA, a 19th Century ivory ground Quashqa'i rug. The cost of this piece will translate to $3,400 Canadian. I trust this will meet your requirements”. It is obvious that the letter was anti-dated when it was signed by Tasch. According to the appellant he had not even met Tasch on or before April 5, 1986.
Payne estimated that if the appellant’s claimed deduction for $18,000 for the artifact had not been disallowed by Revenue Canada the income tax payable by the appellant would have been approximately $10,200 less. In cross- examination the appellant’s agent vigorously suggested that this figure was too high. But it is unnecessary to delve into this conflict because the determination of this appeal does not turn on whether the correct figure is $10,200 or a somewhat smaller amount.
Finally Payne was asked about appraisals obtained by Revenue Canada in the course of the criminal investigation into the conduct of Tasch and Donelian regarding the value of the artifact given to the museum by the appellant. Over objections raised by counsel for the respondent I directed the witness to answer. Two appraisals were obtained. The first was in the range of $100 to $1,000. The second appraisal was $900. I do not regard this evidence as being of assistance to the appellant if for no other reason than that a value between $100 to $1,000 or a value of $900 is not the position of the appellant. He places the value of the artifact at $3,400.
The appeal is allowed, without costs, with respect to the penalty imposed under subsection 163(2) of the Act. This conclusion is based on grounds similar to those relied on in allowing the appeal in Gardner v. Canada. In the case at hand the appellant placed almost total reliance on his financial adviser, Jeffrey Ball. Further, the fact that the museum was registered under the Act was a contributing factor to his decision. Also he had no reason to know of the dishonesty of Tasch and Donelian.
On the other hand the appeal from the disallowance of the deduction is dismissed. It has not been established on a balance of probability that the appellant made a charitable contribution in the amount of $3,400 in 1986 which is the amount he claims is deductible. What is said on page 2479 of the reasons for judgment in Beverley Ball v. Canada about Tasch and Donelian is equally applicable to this case.
Appeal allowed in part.
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