Walby – Tax Court of Canada finds that s. 248(30) provided no credit for the cash component under a gifting program

MacPhee J applied Maréchaux to find that since the gifting program participated in by the taxpayers was a single interconnected arrangement with a view to profiting from large charitable receipts, none of the “gifts” made by the taxpayers including their cash contributions, qualified as gifts for s. 118.1 purposes, so that no credit could be claimed for even the cash components, as now argued by the taxpayers.

He further found that since s. 248(30) only operated to cure for certain advantages where there was a “gift,” their lack of donative intent also meant no relief under s. 248(30). Furthermore, even if there were a cash “gift”, the amount of the related advantages (being the dollar amount of the software licences that were to be received and donated or, alternatively, the inflated tax credits to be received or, in the further alternative, the value of the “pretence” documents to be received) should be valued for s. 248(32) purposes based on the value of what was expected to be received at the time of the “donation” rather than on what in fact was received under a bogus arrangement. So valued, the advantage amount exceeded the cash contribution amount and, thus, exceeded the 80% threshold under s. 248(30).

Neal Armstrong. Summary of Walby v. The King, 2023 TCC 164 under s. 248(30).