Tax Court of Canada


Income tax

Administration and enforcement

Inflated amount of tax receipt was not result of “pretence documents” and therefore was not benefit that vitiated gift

Taxpayer M participated in pharmaceutical donation program A in 2003 and pharmaceutical donation program B in 2004 and 2005. Taxpayer E participated in pharmaceutical donation program B in 2005. In 2003 tax return M claimed amount stated in tax receipt as gift and reported capital gain of $47,002.80 from disposition of pharmaceuticals identified on attachments to tax receipt. M claimed cash gifts of $15,350 and $15,075 and in-kind donations of $41,108.82 and $37,815.15 for taxation years 2004 and 2005. E claimed cash gifts of $39,966 and in-kind donations of $124,459.25 for 2005 taxation year. Minister disallowed claims for charitable donation tax credits in 2004 for M and 2005 for M and E. After taxpayers filed notices of objection to these reassessments, Minister reassessed taxpayers and for 2005 taxation year, E and M were allowed charitable donation tax credits for cash gift of $39,966 and $15,075. Taxpayers appealed. Appeals by M for 2003 and 2005 taxation years dismissed and for 2004 taxation year allowed in part; appeals by E dismissed. Burden of proof in tax cases and relationship of that burden to assumptions of fact made by Minister had been subject of much commentary in tax jurisprudence. Question in appeals was whether any of Minister’s assumptions of fact should be “downgraded” to material facts that must be established by evidence on record. Taxpayers consciously choose to participate in programs with little or no knowledge of what went on behind curtain and in such circumstances, it was not unfair to taxpayers to allow Minister to assume what went on behind curtain. By participating in programs without further inquiry, taxpayers accepted risk that facts behind curtain were not what they expected them to be. Minister’s assumptions of fact as stated in replies were to be taken as true except to extent expressly recanted by Minister and taxpayer must present at least prima facie case to demolish those assumptions of fact. Valuations used by donation program A to issue tax receipt were patently flawed and did not demolish Minister’s assumption that fair market value of pharmaceuticals at time they were gifted in 2003 did not exceed $1,759.80. It was found that pharmaceuticals donated by M in 2003 had fair market value no greater than $1,759.80. Based on assumed facts and evidence inflated amount of tax receipt was not result of “pretence documents” and therefore was not benefit that vitiated gift. Taxpayers did not make gifts in-kind. M made cash gift of $15,350 in 2004 and was entitled to charitable donation tax credit in respect of that gift.

Morrison v. The Queen (2018), 2018 CarswellNat 6307, 2018 TCC 220, John R. Owen J. (T.C.C. [General Procedure]).

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