Jubenville v. The Queen, docket 2001-2768(IT)I (Informal Procedure)

Date: 20020703

Docket: 2001-2768-IT-I

BETWEEN:

SHEILA JUBENVILLE,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

Reasonsfor Judgment

Beaubier, J.T.C.C.

[1]            This appeal pursuant to the Informal Procedure was heard at Regina, Saskatchewan on June 25, 2002. The Appellant testified. The Respondent called Brian Aronson, C.A. an auditor for "Consulting and Audit Canada" who audited Tzivos Hashem Canada Inc. ("Tzivos") a registered charity in 1997 and its "division" Canadian Homes for Russian Children ("CHRC"). The Appellant and her husband adopted two children from Russia in 1997 through CHRC.

[2]            At issue is charitable receipt #5003397 from Tzivos dated December 29, 1997 for $14,000 which the Appellant claimed in her 1997 income tax return (Exhibit A-2).

[3]            The particulars in dispute are outlined in paragraphs 2 to 10 of the Reply to the Notice of Appeal. They read:

2.              The 1997 income tax return was initially assessed on May 22, 1998.

3.              In computing her tax liability for the 1997 Taxation Year, the Appellant claimed, in the computation of her non-refundable tax credits and tax payable, an amount of $14,000.00 for a charitable donation (the "Donation Amount").

4.              In reassessing the Appellant for the 1997 Taxation Year, the Minister of National Revenue (the "Minister") disallowed the claim for the Donation Amount.

5.              The Appellant filed a Notice of Objection in respect of the 1997 Taxation Year, received June 30, 2000.

6.              The Minister confirmed the reassessment for the 1997 Taxation Year by means of a Notification of Confirmation dated April 27, 2001.

7.             In so reassessing the Appellant, the Minister made the following assumptions of fact:

(a)            the facts admitted above;

(b)            the Appellant claimed a Donation Amount of $14,000.00 for a CHRC donation paid to Tzivos Hashem Canada Inc. (hereinafter "Tzivos");

(c)            the donation described in subparagraph 7(b) was not:

(i)             voluntary; or

(ii)            made without expectation of return;

(d)            as part of their adoption fees, the Appellant was required by Tzivos to make a donation;

(e)            Tzivos did not provide the Appellant with an official receipt for income tax purposes; and

(f)             the Appellant is not entitled to include the Donation Amount in the computation of her non-refundable tax credits and tax payable for the 1997 Taxation Year.

B.             ISSUES TO BE DECIDED

8.              The issue is whether the Appellant was entitled to a charitable donation credit under section 118.1 of the Income Tax Act, R.S.C. 1985, c.1 (5th Supp) (the "Act").

C.             STATUTORY PROVISIONS, GROUNDS RELIED ON AND RELIEF SOUGHT

9.              He relies on section 118.1 of the act and Regulation 3501 of the Income Tax Regulations, as amended for the 1997 Taxation Year.

10.            He submits that as the Donation Amount was not a charitable gift as defined in subsection 118.1(1) of the Act the Appellant was not entitled to a charitable donation credit under subsection 118.1(3) of the Act.

[4]            Assumptions 7(a) and (b) were not refuted by the evidence. Assumption 7(e) was refuted by Exhibit A-2 and the Appellant's testimony.

[5]            In 1997 the Appellant and her husband adopted two Russian children through CHRC. In proceeding to do so they received Exhibit R-2 dated September 9, 1997 which they followed, more or less, thereafter.

[6]            Exhibit R-2 encloses a set of "steps" titled "The CHRC Adoption Process". It includes the following:

1.              At the end of Step 2 listing some procedures and fees, the paragraph - "Donation payable to CHRC at Step 2: $3,000 CAD".

2.              Step 5 contains the following underlined paragraph:

Following the adoption of one child, a charitable tax receipt for approximately $11,000 CAD is issued which yields an average of $5,000 in charitable deductions from taxes payable.

[7]            Exhibit A-1 contains the Appellant's money order receipts and post-it notes made at the times that phone calls with CHRC officials occurred respecting the entire procedure. She noted "5,400 CHRC Donation" and "5000 US Donation". However, in Canadian funds, the money order receipts correspond roughly to the $14,000 receipt issued. They total:

                May 07, 1997                                          $ 5,400

                May 07, 1997                                          $ 3,772.98

                May 7, 1997                                            $ 5,159.01

                TOTAL                                                   $14,329.99

It is noteworthy that this money was paid before September 9, 1997.

[8]            In argument, Respondent's counsel referred the Court to paragraphs 7 and 12 from Woolner v. Her Majesty the Queen (F.C.A.) 99 DTC 5722, which read:

This Court has held that a gift, within the meaning of the common law, is a voluntary transfer of property from one person to another gratuitously and not as the result of a contractual obligation without anticipation or expectation of material benefit*(1). In the present case, it is clear that the contributions were voluntary. The main issue for determination is whether or not the contributions were made with the anticipation of a benefit or advantage of a material nature.

...

The taxpayers have argued there is not link between the contributions made and the bursaries awarded. There is clear evidence that such a link existed. When bursaries were being applied for, a request was made that a pledge form also be filled out at the same time. Further in a report by the Student Aid Committee it is stated "It is assumed that the student and/or parents will contribute as much as they are able to the fund". In addition after pledges were made donors were reminded of their pledge when it had not been fully fulfilled.

[9]            The Court finds that the Appellant and her husband genuinely donated the money in question out of a charitable desire to help the children in Russian orphanages. She and her husband are committed to the welfare of children, and not just the children they adopted. She testified, and the Court believes her, that she and her husband gave the funds freely, in addition to fees they paid, on the basis that they would be used to provide for the care, nutrition and health of Russian orphans and they checked on that when they were in Russia.

[10]          In the Court's view the $3,000 mentioned in Step 2 was paid as a condition of complying with the steps of adoption. The rest was a donation made gratuitously by the Jubenvilles without any contractual obligation and without anticipation or expectation of material benefit. They were donated as a bona fide charitable donation to a registered charity by the Jubenvilles.

[11]          It was only after 1997 that Revenue Canada audited Tzivos and thereafter reassessed the Appellant. She never acted falsely or by way of subterfuge. To the contrary, all of her actions were charitable in origin.

[12]          However money was paid or donated by the Jubenvilles after September 9, 1997. Step 2 of Exhibit R-2 does contain the appearance that CHRC expected payment of the $3,000 "Donation" as a part of that Step in the adoption process. Thus it appears to be part of a contractual obligation to be made in anticipation of material benefit. There is no clear evidence as to when that step occurred or when that exact $3,000 was paid. Nonetheless, in these circumstances, that sum must be excepted from $14,000 claimed by the Appellant in the receipt issued for 1997.

[13]          The appeal is allowed respecting $11,000 of the total of $14,000 claimed by the Appellant in 1997. She is entitled to claim a charitable donation credit under section 118.1 of the Income Tax Act for 1997 in the amount of $11,000.

[14]          The Appellant had to come from Yorkton, Saskatchewan to Regna, a round trip in excess of 320 kilometers. She is awarded the sum of $200 on account of out-of-pocket disbursements incurred. She also retained a lawyer to prepare her Notice of Appeal for which she is entitled to costs of $150. As a result, she is awarded a total of $350 costs and disbursements respecting her appeal.

Signed at Saskatoon, Saskatchewan, this 3rd day of July, 2002.

"D. W. Beaubier"

J.T.C.C.

COURT FILE NO.:                                                 2001-2768(IT)I

STYLE OF CAUSE:                                               Sheila Jubenville v. The Queen

PLACE OF HEARING:                                         Regina, Saskatchewan

DATE OF HEARING:                                           June 25, 2002

REASONS FOR JUDGMENT BY:      The Honourable Judge D. W. Beaubier

DATE OF JUDGMENT:                                       July 3, 2002

APPEARANCES:

For the Appellant:                                                 The Appellant herself

Counsel for the Respondent:              Tracey Harwood-Jones

COUNSEL OF RECORD:

For the Appellant:                

Name:                               

Firm:                 

For the Respondent:                             Morris Rosenberg

                                                                                Deputy Attorney General of Canada

                                                                                                Ottawa, Canada

2001-2768(IT)I

BETWEEN:

SHEILA JUBENVILLE,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

Appeal heard on June 25, 2002 at Regina, Saskatchewan by

the Honourable Judge D.W. Beaubier

Appearances

For the Appellant:                                         The Appellant herself

Counsel for the Respondent:                         Tracey Harwood-Jones

JUDGMENT

          The appeal from the reassessment made under the Income Tax Act for the 1997 taxation year is allowed, and the reassessment is referred back to the Minister of National Revenue for reconsideration and reassessment in accordance with the attached Reasons for Judgment.

          The Appellant is awarded the sum of $350 on account of costs and disbursements incurred in prosecuting her appeal.

Signed at Saskatoon, Saskatchewan, this 3rd day of July, 2002.

"D. W. Beaubier"

J.T.C.C.