Federal Appeal


Taxation

Income tax
Arguable that Parliament intended to recognize split gifts, wherever made, in line with civil law

Appellant claimed tax credits with respect to alleged gifts made to registered charity pursuant to s. 118.1 of Income Tax Act (Can.) (ITA). Some gifts were made from personal funds and some were funded by loans tied to the gifts. Appellant claimed he was entitled to full amount of claimed tax credits or, alternatively, to tax credits claimed in respect of portion of gifts that exceeded the value of any consideration he would have received in the process. Alternative argument invoked civil law of Quebec even though no purported donations were made in that province. Tax Court judge allowed motion by respondent to strike out alternative plea, rejecting argument that appellant could resort to civil law of Quebec. Interpretation Act (Can.) (IA) ensures that civil law is not applied in rest of Canada and that common law not applied in Quebec when private law concepts of two legal systems are called into play. Tax Court judge found support in 2002 amendments to ITA allowing a tax credit for certain ‘gifts’ that would be invalid under private law solely because taxpayer received benefit in return for making the gift. He held that by providing result more clearly reflecting civil law concept of remunerative gift, 2002 amendment “legislatively dissociates the common law meaning of gift from the federal legislation”. He held that common law meaning of “gift” has been clearly established and common law does not recognize as a gift a transfer of property for partial consideration. Appellant’s appeal allowed. Explanatory Notes to 2002 ITA amendments state that there have been certain decisions made under common law where it has been found that transfer of property to charity was made partly in consideration for services and partly as gift. Notes suggest that state of jurisprudence in common law provinces was not as certain as Tax Court judge held. Nor has jurisprudence clearly rejected split gifting. It could not be said with certainty that meaning of “gift” prior to 2002 amendments excluded notion of split gift in common law provinces and that effect of amendments was to change that state of affairs. Quest for uniformity in application of ITA not, in itself, sufficient reason for disregarding applicable private law. IA recognizes role of civil law and common law in application of federal legislation which necessarily entails possibility of diverging results. Appellant argued that Parliament intended to recognize split gifts, wherever made, in line with civil law. It would have been open to Parliament to do so and it was arguable this was what Parliament intended. Tax Court judge should not have struck out impugned plea.

French v. R. (Feb. 29, 2016, F.C.A., Marc Noël C.J., A.F. Scott J.A., and Yves de Montigny J.A., A-102-15) Decision at 249 A.C.W.S. (3d) 222 was reversed. 263 A.C.W.S. (3d) 534.

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