Lamarre Proulx T.C.J.:
These appeals were heard under the informal procedure. They were heard together but not on common evidence. The grounds of appeal and the taxation year are different for each appellant, though the appeals concern the same point of law, namely a gift within the meaning of s. 118.1 of the Income Tax Act ("the Act”).
In Ms. Dupriez’s case the question is whether in the 1994 taxation year she made, within the meaning of the said s. 118.1 of the Act, a gift of property other than cash by giving a registered charity syringes with an alleged market value of $4,000.
In Mr. Coutlée’s case, the question is whether in 1995 he made a gift of $3,000, again within the meaning of s. 118.1 of the Act, when he paid that amount to the organization that handled the adoption of the appellants’ child.
The facts on which the Minister of National Revenue (“the Minister”) relied in reassessing the appellant, Ms. Dupriez, are set out in paragraph 4 of the Reply to the Notice of Appeal (“the Reply”) as follows:
[TRANSLATION]
a. in her tax return for the 1994 taxation year the appellant claimed as a charitable donations credit the sum of $4,000 appearing on a receipt dated February 24, 1995 and issued to the appellant by the organization TDH POUR LES ENFANTS, located in Montréal;
b. this receipt is not in accordance with s. 3501 of the Income Tax Regulations:
C. the receipt refers to a “donation in kind made in 1994’’, without specifying what that donation was;
d. this was not a genuine gift to TDH POUR LES ENFANTS:
e. TDH POUR LES ENFANTS acted as an intermediary between the ap- pellant and the orphanage in Vietnam from which the appellant adopted
a child:
f. the gift (according to the appellant, syringes) was intended by the appellant for orphanages in Vietnam:
g. TDH POUR LES ENFANTS was only used as an intermediary for sending this gift;
h. no invoice showing the purchase of syringes by the appellant was submitted, nor any other document establishing that the value of these syringes was $4,000;
i. at all times relevant to this case, the orphanages in Vietnam for which the syringes were intended were not registered charities within the meaning of the Income Tax Act, nor charitable organizations outside Canada to which Her Majesty in right of Canada had made a gift during the 1994 taxation year or the 12 months immediately preceding that taxation year.
In reassessing the appellant Coutlée the Minister relied on the facts set out in paragraph 4 of the Reply, as follows:
[TRANSLATION]
a. in his tax return for the 1995 taxation year the appellant claimed as a charitable donations credit the sum of $3,000 appearing on a receipt dated January 15, 1996 and issued to the appellant by the organization TDH POUR LES ENFANTS, located in Montréal:
b. this receipt is not in accordance with s. 3501 of the Income Tax Regulations:
C. TDH POUR LES ENFANTS acted as an intermediary between the appellant and the orphanage in Vietnam from which the appellant adopted a child;
d. a sum of $3,000 was required from the adoptive parents as a “gift” which was part of the adoption fees for the child;
e. this was not a genuine gift;
f. this predetermined sum of $3,000 was intended for the orphanage in Vietnam and the adoptive parents had a legal or moral obligation to pay it, having been billed for it, before the last trip and the arrival of the child in Canada;
g. TDH POUR LES ENFANTS was only used as an intermediary for sending this amount to the orphanage in Vietnam;
h. this amount was in fact sent to the orphanage in Vietnam in 1995:
1. at all times relevant to this case, the orphanage in Vietnam was not a registered charity within the meaning of the Income Tax Act nor a charitable organization outside Canada to which Her Majesty in right of Canada had made a gift during the 1995 taxation year or the 12 months immediately preceding that taxation year.
The Notice of Appeal is identical for both appeals and reads as follows:
[TRANSLATION]
We are hereby bringing an appeal under the informal procedure against the decision taken in our two cases having to do with charitable gifts to TDH pour les enfants.
We first received a letter from Revenue Canada’s Quebec office telling us we had received a benefit in exchange for our gift, namely a child! This was the reason that the two charitable gifts were disallowed. To that we could only answer that we had not bought our son and so we objected.
We later learned that our case had been linked to another adoption case and that all the objections were dismissed. On reading the judgment rendered in Jean- Pierre Beaudry v. The Queen on May 9 last, we noted a number of differences the effect of which is that the two cases cannot be regarded as similar.
Unlike the Jean-Pierre Beaudry case, we signed with TDH pour les enfants a letter of intent in which the costs directly associated with the adoption were Clearly identified, namely notarial costs, translation fees, legal fees in Vietnam, travel expenses and the charitable gift for the running of the orphanage and the various projects undertaken by the organization in Vietnam on behalf of children who are not fortunate enough to have been adopted. That is one point which is quite different.
The second point we should like to mention is that at the time we undertook the adoption proceedings TDH was recognized as a charity by Revenue Canada specifically on account of its activities in the orphanages of various countries where TDH is involved.
We checked with the Department, which confirmed this to be true. Accordingly, we acted in good faith in claiming these charitable gifts in our tax returns and, in particular, 1 acquired 4,000 syringes which constituted my charitable gift....
The appellant, Ms. Dupriez, admitted subparagraphs 4(a), (c), (e), (f) and (h) of the Reply. In her testimony she explained that in 1994 she provided services to a travel-health clinic and in return for those services received 4,000 syringes. She said that in September 1994 she gave them to Terre des hommes pour les enfants Inc., hereinafter referred to as “TDH pour les enfants”. Ms. Dupriez maintained that these syringes were worth at least $4,000. However, she filed no document from the clinic setting out the services provided by her and stating that the syringes were worth at least $4,000. It should be noted that in the last paragraph of the Notice of Appeal the female appellant does not refer to a travel-health clinic, but simply to the acquisition of 4,000 syringes.
The receipt from TDH pour les enfants referred to in subparagraphs 4(a) to (c) of the Reply was filed with the appellant’s return as Exhibit I-1. It is as described in those subparagraphs.
Exhibit A-l is the preliminary application filed by the appellants with TDH for adoption purposes. Attached to this application is the payment schedule, which is also found in Exhibit I-14. It is clear therefrom that from the outset the adoptive parent is made aware that the total adoption costs of US$6,300 plus €336,500 include a gift in the amount of $3,000.
Exhibit -2 is a description of the TDH adoption program. It states, inter alia, in the French version:
... fous les frais couvrent la continuité du programme d’adoption au Canada et les frais encourus par des agences internationales ou avocats pour l’adoption dans un pays étranger. Il y a par contre une demande d’un don (déductible d’impôt) de 3 000 $, lequel supportera le développement de projets visés à venir en aide aux enfants du pays d’origine de votre enfant. Nous ferons tout en notre pouvoir pour réduire le plus possible les dépenses dans tous les autres domaines. Nous croyons fermement qu'il est impératif d'insister sur une norme d'adhérence stricte.
Il est important de réaliser que plusieurs pays du tiers-monde sont peu disposés à voir leurs enfants adoptés dans des pays étrangers. C’est ainsi que nous voulons clairement leur montrer que même si nous sommes impliqués dans l’adoption internationale, nous sommes également impliqués dans des projets dans leur pays pour les aider à chercher une solution au sous-développement, ainsi que venir en aide aux mères à prendre soins et à renforcer économiquement, socialement et émotionellement leur famille.
Nous désirons souligner ici que plusieurs pays du tiers-monde eux-mêmes souvent encouragent et/ou mandatent cette philosophie. C’est pourquoi cette stratégie est consistante dans notre philosophie et sert également à établir de très bons rapports entre les pays du tiers-monde et nous, et également aident à réaliser quatre buts étroitement reliés entre eux:
I - La réalisation des besoins des parents au Canada pour un enfant.
2- Pourvoir des parents ainsi qu’une meilleure vie à un enfant qui a ni l’un
ni l’autre.
3- Aider par le biais de votre don à développer des actions directes pour
les centaines d’enfants et leurs familles qui demeurent dans le pays d’où viendra votre enfant.
4- Donner aux pays du tiers monde une vision de Terre des Hommes en
temps d’agence de développement les aidant à développer leur population dans leur pays propre.
The English text of the same document is as follows:
... The fees charged are those which cover the maintenance of the adoption program in Canada and the fees charged by international agencies or lawyers to process the adoption in the foreign country. There is however, the request of a donation (tax-deductible) of $3,000., which will go to support development projects involving the children from the country from which a particular child is adopted. Whereas we will make every effort to reduce costs as much as possible in all other areas, this is an area where we feel it is imperative to insist on strict adherence to a norm.
It is important to realize that many third world countries themselves are very reluctant to see their children adopted into foreign countries, and we wish to demonstrate clearly to them that while we are involved in foreign adoption, we are at the same time committed to projects in their country which seek solutions to the causes of underdevelopment, and which help mothers to look after and strengthen their families economically, socially, and emotionally.
We wish to stress that the foreign countries themselves often encourage and/or mandate this philosophy. Thus this strategy is both consistent with our own philosophy and serves to establish a strong relationship between us and the third world country, and so helps in realising four interrelated goals:
I - The realisation of the needs of parents in Canada for a child.
2- The provision of parents and a better life to a child who has neither. 3- The help through your donation to hundreds of other children and their families in the country from which your child comes.
4- The informed perspective of the third world country in seeing TDH’s
adoption program as a means for sustaining developmental programs in their country.
The payment of the alleged gift was made by cheque on March 17, 1995 (Exhibit I-4).
José Garcia testified at the request of counsel for the respondent. He is TDH’s comptroller. He explained that in 1992 Terre des hommes Canada Inc. had created another corporation, known as “Terre des hommes pour les enfants Inc.” (called “TDH” in these reasons), and that this non-profit corporation handled international adoptions, whereas the purpose of Terre des hommes Canada Inc. was humanitarian activity in general, excluding international adoption activities. After 1992 the stationery may not have changed but the accounting was separate. Accordingly, all transactions described in the instant case were with Terre des hommes pour les enfants Inc., or TDH.
Exhibit 1-12 is a document dated May 27, 1992, written for the Director, Charities Division at Revenue Canada. It mentions that TDH pour les enfants Inc. was a duly registered charity as of January I, 1992. Reference is made to Information Circular 80-1 OR and Interpretation Bulletin IT-l lOR2. The letter also states that the charity can only give funds to other organizations which are qualified donees, as defined in s. 149.1(1) of the Act.
Exhibit I-6 is a letter from a representative of the Minister dated May 28, 1996. It states inter alia:
[TRANSLATION I
We are disallowing the receipts from the organization TDH POUR LES ENFANTS INC. since the payments made to that organization represent costs associated with the adoption of a child. For the purposes of the Income Tax Act a gift is a voluntary transfer of property: the donor should not expect to receive any pecuniary compensation or other benefit whatever as a result of such payments.
Counsel for the respondent submitted with respect to the appellant Dupriez that she had not presented evidence of the market value of the property given and that the receipt issued by the charity did not contain the required information. In this connection counsel relied on s. 118.1(1) and s. 118.1(2) of the Act and ss. 3500 and 3501 of the Income Tax Regulations (“the Regulations”).
As to the appellant Coutlée, counsel for the respondent submitted first that the $3,000 payment made by the appellant was not a gift because it was not a gratuitous transfer of property, and second, that the said amount was not given by the charity to a qualified donee. On the first point, counsel relied on the meaning of “gift” for the purposes of s. 1 18.1(1) of the Act, and with respect to the second point she relied on the definition of “registered charity” in s. 248(1) of the Act and the definitions of “charitable organization”, “qualified donee”, “charitable purposes” and “charitable foundation” in s. 149.1(1) of the Act.
Regarding the payment of the amount of $3,000 in 1995, the appellants argued that this was a gratuitous transfer made after the adoption of their child and that the reason for it was their desire to contribute to the welfare of children who were not adopted and who remained in the orphanages of the country from which they had adopted their child. On the question of the value of the property donated in 1994, the appellant Dupriez stated that the syringes given to TDH were indeed worth $4,000.
The definitions of “total gifts” and “total charitable gifts” are to be found in s. 118.1(1) of the Act and are as follows:
“total gifts'" — “total gifts” of an individual for a taxation year means the total of
(a) the lesser of
(i) the individual’s total charitable gifts for the year, and
(11) /s of the individual’s income for the year,
(b) the individual’s total Crown gifts for the year, and
(c) the individual’s total cultural gifts for the year.
otal charitable gifts"" — “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 or the total cultural gifts of the individual for the year, or would have been so included for a preceding taxation year if this section had applied to that preceding year) made by the individual in the year or in any of the 5 immediately 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) a registered charity...
(g) a charitable organization outside Canada to which Her Majesty in right of Canada has made a gift during the individual’s taxation year or the 2 months immediately preceding that taxation year....
(Emphasis mine.)
Section 118.1(2) of the Act concerns proof of the gift, and reads as follows:
(2) Proof of gift. 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 proven by filing with the Minister a receipt therefor that contains prescribed information.
The phrase “official receipt” is defined in s. 3500 of the Regulations as follows:
“official receipt” means a receipt for the purposes of subsection 110.1(2) or (3) or 118.1(2), (6) or (7) of the Act, containing information as required by section 3501 or 3502....
Section 3501(1) of the Regulations describes what an official receipt must contain:
3501. Contents of receipts — (1) 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 donation was received:
(e.1) where the donation is a gift of property other than cash
(i) the day on which the donation was received,
(11) a brief description of the properly, and
(111) 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. l );
(g) the name and address of the donor including, in the case of an individual, his first name and initial:
(h) the amount that is
(1) the amount of a cash donation, or
(11) ) 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 was made; and
(1) the signature, as provided in subsection (2) or (3), of a responsible individual who has been authorized by the organization to acknowledge donations.
Volunteer services cannot be the subject of a gift because services are not property, that 1s, something capable of appropriation. For there to be a gift, there must be a transfer of property. In Slobodrian v. R., [1988] 3 C.T.C. 2654 (T.C.C.), a decision dated May 15, 1998, I recently analyzed whether volunteer services could be the subject of a gift within the meaning of s. 118.1(1) of the Act and concluded that they could not as they were not property capable of appropriation.
The appellant, Ms. Dupriez, alleged that she received syringes in return for volunteer services she provided to a clinic. Since she was not paid for her services, she got the syringes for nothing. This does not help in determining their market value. If these syringes really had a market value of at least $4,000, the question arises as to why the clinic would have gotten rid of them as if they were valueless. The appellant filed no documents from which the market value of the syringes could be established. I must therefore conclude that the appellant has not proven the market value of the syringes.
Moreover, in the first place, the receipt issued by the registered charity is not in accordance with ss. 3501 ( 1 )(e. 1 ) and 3501 ( 1 )(A)(ii) of the Regulations, and in the second place, the syringes were not used for the activities of TDH or for those of a qualified donee as defined in s. 149.1(1) of the Act.
Counsel for the respondent referred to R. v. Zandstra, [1974] 2 F.C. 254 (Fed. T.D.), McBurney v. R. (1985), 85 D.T.C. 5433 (Fed. C.A.) and Burns v. Minister of National Revenue (1988), 88 D.T.C. 6101 (Fed. T.D.) and (1990), 90 D.T.C. 6335 (Fed. C.A.). Those judgments all held that the payment of money to a charity is not a gift if the payment was not made gratuitously but was made inter alia to obtain something in return. I will refer to the second judgment mentioned, a judgment of the Federal Court of Appeal which concerned money paid to a religious school by parents who sent their children there. The question was whether these payments were gifts. The court referred to Australian precedent. Accordingly, at page 5436, it quoted the following: Ordinarily, a gift will not be made in pursuance of a contractual obligation: the mere fact that a person has made a contractually binding promise to make a gift may not, however, necessarily deprive it of its character as such when it is made.... The judge then referred to the example of a wedding gift. Everything depends on the reason why the individual undertook to make the gift: [A] gift will ... be without valuable material return .... [A] gift ordinarily "proceeds from a "detached and disinterested generosity" ... ‘out of affection, respect, admiration, charity or like impulses..."" A gift is an act done gratuitously, with liberal intent and with no consideration in mind.
I further quote: /n a borderline case involving dispute as to whether a particular transaction constitutes a gift ... the presence or otherwise of the usual attributes of a gift will provide the reference point for answering the essential question. The fact that in the instant case all prospective adoptive parents made a contribution of a substantial and identical amount indicates an operation which is not in the nature of a gift but involves the performance of a contractual obligation assumed by the prospective parents in order to become adoptive parents.
As in McBurney, the appellant argued that the payment was made pursuant to a moral obligation, not a legal or contractual one. In McBurney, the court concluded that the evidence was that the payments to the religious school were directly associated with attendance at that school by the children while at the same time resulting from a moral obligation. It is also interesting to read a remark by the court on the reduction of the payments to the school when the children were no longer attending it. I quote:
There can be little doubt that here, too, the respondent saw it as his Christian duty to ensure his children receive the kind of education these schools provided. The payments were made in pursuance of that duty and according to a clear understanding with the charities that while his children were attending these schools he would contribute within his means toward the cost of operating them. I cannot accept the argument that because the respondent may have been under no legal obligation to contribute, the payments are to be regarded as “gifts”. The securing of the kind of education he desired for his children and the making of the payments went hand-in-hand. Both grew out of the same sense of personal obligation on the part of the respondent as a Christian parent to ensure for his children a Christian education and. in return, to pay money to the operating organizations according to their expectations and his means....
It is significant, in my view, that in the years after his children were no longer attending the OCSA school, the respondent’s payments to that charity declined dramatically....
In the same way, the payment made by the appellants in 1995 and the adoption of their child went hand in hand. The payment undoubtedly resulted from the appellants’ sense of personal obligation to provide decent living conditions for their child and other children. However, this payment was made in performance of a clear agreement between TDH and the appellants. Was it a legal or only a moral obligation? It is not essential to decide that point. The Court only needs to find that the payment of the alleged gift was one of the conditions for obtaining the adoption service. Also, in the case of the appellants it is significant that their contribution to the charitable organization was $150 in 1997.
I therefore conclude that the $3,000 payment was not made gratuitously, or in other words, was not made solely with the liberal intent required in order for the payment to be treated as a gift. I quote Pinard J. in Burns v. Minister of National Revenue, supra, at p. 6105:
1 would like to emphasize that one essential element of a gift is an intentional element that the Roman law identified as animus donandi or liberal intent (see Mazeaud, Leçon de Droit Civil, tome 4ième, 2ième volume, 4ième edition, No. 1325, page 554). The donor must be aware that he will not receive any compensation other than pure moral benefit; he must be willing to grow poorer for the benefit of the donee without receiving any such compensation.
Further, the sum of $3,000 was not devoted to the charitable activities engaged in by TDH itself nor was it paid to a qualified donee as required by s. 149.1(1) of the Act.
The appeals are accordingly dismissed.
Appeal dismissed.
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