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Citation: 2004TCC128
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Date: 20040427
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Docket: 2003-3025(IT)I
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BETWEEN:
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JUANITA LOBO,
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Appellant,
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and
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HER MAJESTY THE QUEEN,
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Respondent.
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____________________________________________________________________
Agent for the Appellant: Harold Coombs
Counsel for the Respondent: P. Michael Appavoo
____________________________________________________________________
REASONS FOR JUDGMENT
(Edited from the transcript of reasons delivered
orally from
the Bench at Toronto, Ontario, on January 22,
2004)
Sarchuk J.
[1] This is an appeal by Juanita Lobo
from an assessment of tax with respect to her 1996 taxation year.
In her return for that year, she declared total income in the
amount of $25,284.06 and claimed a non-refundable tax credit in
the amount of $2,151 with respect to a purported charitable
donation in the amount of $7,500 made to Rocky Ridge Ranch Inc.
(Rocky Ridge). In reassessing the Appellant, the Minister of
National Revenue (the Minister) denied the Appellant's claim
for the tax credit.
[2] Evidence was adduced on behalf of
the Appellant from her husband, Joseph A. Lobo (Lobo). He
testified that his accountant, Harold Coombs (Coombs):
A. ...
approached me with a suggestion that the charity, Rocky Ridge
Ranch, was going to gift me the amount of 7,500 and would I then
be - would it be appropriate or okay with me to donate this gift
to the charity. The gift was going to be made by Mr. Chapman, a
Mr. Bruce Chapman, and ...
Justice
Sarchuk:
Who approached you?
A. Mr. Coombs, who I
have known for a number of years. ... And he approached me
with this suggestion of a gift of 7,500 from Mr. Chapman who
was connected with the Rocky Ridge Ranch, which is a registered
charity. ... And would I donate this amount to the ranch. I
have known Mr. Coombs for sometime and I also knew that he was
connected with this charity, that the charity was doing very
worthwhile work. I knew that Mr. Coombs' daughter worked
there at the ranch and I saw no reason why I should not donate
that gift directly to the charity.
Lobo agreed to do so knowing that it was necessary in order to
obtain a charitable donation receipt. He further testified that
neither he nor his wife ever received anything from Chapman, or
from Rocky Ridge, in any form be it cash or cheque, property or
any other form of compensation. Furthermore, it is not disputed
that neither he nor his wife ever donated anything to the
charity. Nonetheless in December 1996, Lobo was given a receipt
for $7,500 by Coombs and that receipt was included in the
Appellant's tax return for taxation year 1996.[1] Lobo also testified
that another similar "gift" in the amount of $11,200
had been provided to the same charity through Coombs. Lobo had
never met Chapman and said that "all the communication with
me and Mr. Chapman was through Mr. Coombs. I've never met the
gentleman directly or spoken to him". When asked why Chapman
would want to give him a gift of $7,500, he responded "I
really couldn't say why. I'm not familiar with Mr.
Chapman and the charity and the relationship between Mr. Coombs
and Mr. Chapman, so I couldn't fairly say why".
[3] Evidence was adduced from Bruce
Chapman by the Respondent. He is the president of Rocky Ridge, a
charitable organization which among other things operates summer
camps, weekend retreats, outdoor education, etc. Chapman stated
that Coombs originally organized its financial affairs and
subsequently was responsible for all of its accounting.[2] With respect to the
donation in issue, Chapman testified that he had never met Lobo
nor his wife nor had he given a gift of $7,500 to them but only,
"followed the instructions of my accountant at the time and
did what he asked us to do". He described Coombs'
instructions relating to the donation mechanism to be used and
the context in which they were given as follows:
With the reassessments that were coming from the government,
we were personally getting, I use the word "hit very
heavily" and with discussions periodically, I was presented
with a way that would satisfy the compliance of Revenue Canada,
and I just continued to follow those instructions.
Reference was also made to a letter to Mr. and Mrs. A.J. Lobo
signed by Chapman,[3] the relevant portions of which read:
Dear Donor,
This will confirm that in 1996 I have given you a gift of
$7500.00 and have received your instructions for me to
donate this amount to the ranch on your behalf.
Rocky Ridge Ranch Inc. has been instructed that this donation
is being made on your behalf and to issue a charitable donation
receipt directly to you.
The following exchange took place between Chapman and counsel
for the Respondent:
Q. Mr. Chapman, if I
could ask you to turn to Appellant's Exhibit 4.
Do we have a copy for Mr. Chapman?
Mr. Chapman do you recognize that letter?
A. I recognize the
notation. The specifics I'm reminded of, yes.
Q. And is that your
signature at the bottom?
A. Yes sir.
Q. And when would
this letter have been prepared?
A. Well, there's
no date on it. I would have to consult with my office secretary
to confirm this.
Q. Well, Mr.
Chapman, if you look at the top it says December of 1996.
A. Yes.
Q. Is that the date
that this would have been created?
A. I don't
believe so.
Q. And could you
maybe tell the court why this letter would have been created?
A. I followed the
instruction of Mr. Coombs, and this letter was later dictated to
one of the ladies in my office, and just in following his
instructions as my accountant.
Q. So it's your
testimony, then, that it was Mr. Coombs' instructions to
complete this letter?
A. Yes sir.
Q. You will note
that it says here that, "I have given you a gift of
$7500.00". Is that in fact true?
A. I didn't give
it to him. That was according to ledger work, or whatever the
accountancy practices were, as I believed it to be.
Q. So there was no
exchange of funds between yourself and Mr. Lobo, or Mrs.
Lobo?
A. Again I would
have to have my accountant check anything that went past me at
any time.
Q. Mr. Chapman, did
you intend to give Mr. and Mrs. Lobo a gift of $7500.00?
A. No. I intended to
follow my accountant's instructions.
Chapman also testified that at no time did Coombs ask him for
money to be passed on to Lobo or the Appellant. Chapman further
said:
A. Well, I believe
Mr. Coombs at the time explained what would be the compliance
with Revenue Canada, and this would satisfy their
regulations.
Q. And if I rephrase
my question, Mr. Chapman, did you give Mr. Lobo (sic) any
cash to be given to Mrs. (sic) and Mrs. Lobo?
A. No, I did
not.
[4] The Appellant's position as
set out in her Notice of Appeal was:
3. The
taxpayer stated that she and her spouse were the recipients of a
gift with a monetary value of $7,500.00 in 1996, from Mr. Bruce
Chapman. Shortly after acceptance of this gift, the Appellants
issued instructions to the Managing Director of Rocky Ridge Ranch
Inc. These instructions were complied with and an appropriate
donation receipt was issued to the donors.
4. The
Appellant further states that this transaction was concluded
voluntarily and without expectation of any kind of return to the
Appellants or anyone designated by the Appellants.
5. The
taxpayer stated that the charitable donation receipt in question
was properly issued and in accordance with the rules and
regulations of the Charities Act and also the Canada
Tax Act.
[5] Following the submissions on
behalf of both parties, I made the following comments. In my
20-odd years on the Bench, I have never heard a case that
had so little merit. I also have never heard a case where the
representation was as inappropriate as it was. I do not know
whether Coombs was unaware of his role as the Appellant's
representative and of the role he could play or perhaps should
not have played in this hearing. However, if he has not appeared
in Court on behalf of a client before, he most certainly should
have made some enquiries. His failure to do so put him and it put
his client, in particular, and the Court, in a difficult
position, and that should not have happened.
[6] Having said that, there is
absolutely no credible evidence to support the Appellant's
position. The simplest way of putting it is that there was an
unusual arrangement structured by Coombs as a result of which
Mr. Lobo was approached with a "donation"
proposition that he accepted. There is no evidence whatsoever
that there was a donation of $7,500 at any time by either
Mr. or Mrs. Lobo. Equally, there is absolutely no
evidence Chapman and his evidence was clear on this point, that
he in any form whatsoever provided the amount of $7,500 to the
Appellant as part of the proposed transaction. There is no
question that a donation receipt was issued and given
Chapman's evidence, no question as to who in fact created
that receipt.
[7] There is no evidence capable of
supporting that position advanced on behalf of the taxpayer. The
only logical conclusion is that there was absolutely no transfer
of any kind of property from Chapman or from the charity to the
Appellant, and no evidence whatsoever that any moneys were
donated by the Appellant to the charity. What was intended in all
of this heaven only knows, but there is no question that the
charitable donation receipt was in my view fraudulent. There is
nothing in the evidence to support its legitimacy. This alone is
sufficient to warrant dismissing the appeal.
[8] Even if one were to consider the
"paper transaction" to be legitimate, the Appellant
could not succeed. In Woolner v. The Queen, 99 DTC
5722, the Federal Court of Appeal had occasion to deal with
taxpayers who had made their contributions to a church with the
anticipation that their children would receive bursaries. The
Court found that this constituted a material benefit for them and
to that extent the contributions were not deductible charitable
donation tax credits. In particular, the following comment can
appropriately be applied to the present case:
[7] 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. 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.
There is no question in the present case that no contributions
of any kind were in fact made by the Appellant to Rocky Ridge.
However, had the proposed "gifting scheme" in fact
occurred, there would have been a link between the contribution
and the benefit of the gift previously received by the donor.
This, in my view, would not have constituted a voluntary transfer
form the Appellant to Rocky Ridge since it arose from a
contractual arrangement.
[9] For the foregoing reasons, the
appeal is dismissed.
Signed at Ottawa, Canada, this 27th day of April, 2004.
Sarchuk J.
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