Citation: 2011TCC559
Date: 20111208
Docket: 2008-3718(IT)I
BETWEEN:
SERGIO SARSONAS,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Sheridan J.
[1]
The Appellant, Sergio Sarsonas, is
one of a large group of taxpayers whose files were discovered among the records
of a tax preparer who was ultimately convicted of selling charitable donation
receipts to his clientele. During the years under appeal, Ambrose Danso-Dapaah
was carrying on business with an associate, George Gudu as ADD Accounting and/or Payless Tax (collectively,“Payless Tax”). Payless Tax
charged its clients a fee for preparing their returns and a further 10% of the
face value of any charitable donation receipts provided by Payless Tax.
[2]
This scheme was described
by the Respondent’s witnesses, Barbara Lovie and Deborah Edyvean. They were involved in the investigation of Payless Tax
undertaken by Canada Revenue Agency in 2006. Both were clear and precise in
their testimony and I accept without hesitation their evidence. As of the date
of this hearing, Ms. Lovie had been with the Canada Revenue Agency for some 35
years, 26 of which had been spent in Enforcement. According to her evidence,
the quantum of false donation receipts issued by Payless Tax was approximately
$21.6 million resulting in $6.2 million of non‑refundable tax credits for
charitable donations.
[3]
The Appellant’s records
were among those seized from Payless Tax including, in electronic and/or paper form, copies
of tax returns, charitable donation receipt forms and client invoices. As a
result, the Minister of National Revenue reassessed the Appellant’s 2003, 2004
and 2006 taxation years in which he had been initially allowed non-refundable
tax credits for charitable donations of $4,000, $6,200 and $5,692,
respectively. In so reassessing, the Minister assumed that none of these
amounts had, in fact, been donated to the charities named in the receipts filed
with the Appellant’s income tax returns. The Minister assumed further that
rather than making a gift to the charities, the Appellant had merely purchased
the ostensibly “official receipts” for 10% of the value shown therein.
[4]
The onus is on the Appellant to
disprove these assumptions. In respect of the 2003 taxation year only, the
reassessment was made after the normal reassessment period and accordingly,
under subsection 152(4) of the Income Tax Act, the Minister bears the
threshold onus of proving the reassessment was justified.
[5]
The Appellant represented himself
and was the only witness to testify on his behalf. He was candid in his
admission that Payless Tax had prepared his returns in 2003, 2004 and 2006,
that he had claimed charitable donation deductions in the amounts assumed by
the Minister and that he knew nothing about the charities involved. He denied,
however, having paid Payless Tax only 10% of the face value of the charitable
donation receipts issued to him. He claimed to have paid the full amounts in
cash to Payless Tax to donate to charities recommended by Payless Tax.
[6]
Using the 2003 taxation year as an
example, the Appellant said he had donated a total of $4,000 in cash to the
CanAfrica International Foundation: $2,000 was paid to Payless Tax before his
return was filed and the balance of $2,000, after he received the refund
triggered by the filing of the charitable donation receipt. However, he had no
receipts to show that he had made the cash payments to Payless Tax nor did he
produce any bank statements or any other documents which might have substantiated
the payment of these amounts.
[7]
Counterbalancing the Appellant’s
testimony was the evidence of Ms. Lovie. Explaining that the Appellant’s
records had been found among the material seized from Payless Tax, Ms. Lovie then
identified a Payless Tax spreadsheet listing the Appellant and his spouse as having
donated $4,000 and $2,000, respectively, in 2003 together with a description of
goods in-kind (toys, clothes, hardware). Also discovered were copies of “T-1
DON” forms for each of these amounts and an invoice bearing the
Appellant’s name only, the text of which reads:
|
Re:
Preparation of 2003 Personal Income Tax Return and related schedules.
|
|
Tax
Return Preparation Fee
|
0.00
|
|
reCEIPT (sic)
$ 4,000.00
|
400.00
|
|
receIPT (sic)
$ 2,000.00
|
200.00
|
|
|
|
|
Gross
|
600.00
|
|
|
|
|
Total
|
600.00
|
[8]
Given what she knew about the
Payless Tax charitable donation scheme and read in light of the returns and
charitable donation receipts filed by the Appellant and his spouse, Ms. Lovie
interpreted the invoice to mean that the Appellant had been billed $400 (representing
10% of the charitable donation of $4,000 he claimed in 2003) and $200 (10% of
the $2,000 amount claimed by his spouse) for charitable donation receipts
reflecting those amounts.
[9]
The Appellant offered no response
to this analysis other than to insist he had paid the full $4,000 claimed. He
said he was not sophisticated in tax matters and had relied completely on
Payless Tax to do things properly. Notwithstanding the latter comment, he
confirmed on cross-examination that he had provided to Payless Tax the figures
reported in his returns and they were accurate as reproduced in the
corresponding documents seized from Payless Tax.
[10]
Counsel for the Respondent also
raised the issue of the Appellant having claimed a non-refundable Transit Pass
tax credit of $1,092 in 2006. On cross‑examination, the Appellant denied
having claimed it, insisting that he had taken his car to work that year and
would not have had a bus pass. However, a review of his 2006 income tax return
showed that amount had been claimed. The Appellant said it had never been his
intention to claim it and he had not realized Payless Tax had reported it in
his return. In any event, he said he was not appealing that aspect of his 2006
taxation year.
Analysis
[11]
The Respondent having conceded
that at the time they were filed, the charitable donation receipts for 2003,
2004 and 2006 conformed to the requirements of the legislation, the only issue
is whether the Appellant made a “gift” to a registered charity that would
entitle him to claim non-refundable tax credits pursuant to section 118.1 of
the Income Tax Act.
[12]
The word “gift” is not defined in
the legislation. The leading case on the meaning of “gift” is The Queen v.
Friedberg, 92 DTC 6031, where Linden J.A., at page 6032, defined
“gift” as:
… [A] gift is
a voluntary transfer of property owned by a donor to a donee, in return for
which no benefit or consideration flows to the donor …
[13]
Counsel for the Respondent also
cited Coombs et al v. The Queen, 2008 DTC 4004, in which Woods J.
listed the requisite elements of this definition as follows:
[15] … First,
it is necessary that the gifted property be owned by the donor, second that the
transfer to the charity be voluntary, third that no consideration flow to the
donor in return for the gift, and fourth that the subject of the gift be
property, which distinguishes it from providing services to the charity. These
elements reflect the general notion that a taxpayer must have a donative
intent in regards to the transfer of property to the charity. [Emphasis
added.]
[14]
In Webb v. The Queen, 2004
TCC 619, [2004] T.C.J. No. 453 at paragraph 16, Bowie J. enlarged on the
notion of “donative intent”:
[16] Much has been written on the subject of
charitable donations over the years. The law, however, is in my view quite
clear. I am bound by the decision of the Federal Court of Appeal in The
Queen v. Friedberg, among others. These cases make it clear that in order
for an amount to be a gift to charity, the amount must be paid without benefit
or consideration flowing back to the donor, either directly or indirectly, or
anticipation of that. The intent of the donor must, in other words, be entirely
donative.
[15]
In my view, the
Appellant has failed to establish that he made a “gift” as that term is
understood in the jurisprudence in any of the taxation years under appeal. Even
if I were to accept the Appellant’s story that he gave $4,000 to Payless Tax to
donate to the CanAfrica International
Foundation in 2003, the payment of that amount would not constitute a “gift” as
the transfer of the cash was entirely contingent upon his receiving a tax
deduction. But I doubt that is what happened. The Appellant admitted he knew
nothing about any of the charities he supposedly donated to yet would have me
believe he handed over a sizeable chunk of his rather modest after-tax income
to them. His donation history was limited entirely to the years Payless Tax was
filing his returns and running its charitable donation scam. As shown by the Transit Pass claim, the
Appellant was, at best, not particularly careful in filing his returns. Even
leaving aside the damning testimony of Ms. Lovie, his testimony is
overall, simply not credible. Overall, I do not believe he made donations in
the amounts claimed in any of the taxation years under appeal.
[16]
I do believe that it was thanks to
the scoundrels at Payless Tax that the Appellant got himself into trouble.
However, that does not diminish the fact that he knew he had not made the
donations in question and yet was prepared to file his returns knowing them to
contain false information. This is sufficient to justify the Minister’s reassessment
of the 2003 taxation year after the normal reassessment period.
[17]
For the reasons set out above, the
Appellant’s appeals of the 2003, 2004 and 2006 taxation years are dismissed.
Signed at Ottawa, Canada, this 8th day of December 2011.
“G. A. Sheridan”
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