A recent decision of the Tax Court of Canada serves as an
important reminder to taxpayers and charities of several
fundamental issues when it comes to making and receipting
donations. At issue in Hassan v. R. was the
appellant's claim for a 2009 charitable tax credit relating to
his purported donation to Operation Save Canada's Teenagers for
which he received a charitable tax receipt for $25,000. The
appellant claimed that although he gifted only $300 in cash in
2009, at the end of that year he pledged to make $25,000 worth of
donations within the following year, ending late 2010.
According to the appellant, he then proceeded to honour the pledge
by making a series of cash gifts that he personally delivered to
the charity's head office.
At the hearing, the appellant was not able to provide bank
statements which supported the alleged cash donations nor was he
able to describe the charitable activities of charity.
Furthermore, the Court found that the paperwork provided to the
appellant by the charity was "lacking and sloppy" and
resultantly did not satisfy the prescribed information requirements
of a donation tax receipt.
The Court categorized the alleged donation and corresponding
receipt as a "fraud on the Canadian tax system" and,
moreover, a fraud "on the Canadian public".
In rendering its judgment, the Court commented on the following
CRA has made it clear in several of its publications that a
pledge (or promise to make a gift) is not in itself a gift for
which an official donation receipt may be issued. If a donor
proceeds to honour a pledge, however, a receipt may be issued at
such time as the actual donation is made. In Hassan v.
R., the Court held that the appellant's receipt of the
$25,000 donation tax receipt in 2009 was "obviously not
permitted under the Income Tax Act". The Court
further found that with respect to the alleged donation of $300 at
the end of 2009, if such donation was even made, it was done with
the intention of receiving a grossly inflated tax receipt thereby
negating the appellant's argument that such donation was, in
fact, a receiptable gift.
CRA has set out the information that must be included on an
official donation receipt. As held in Hassan v. R.,
where a charitable receipt does not conform to the prescribed
information requirements, the receipt may be found invalid such
that it cannot be used to support the claim of a donation tax
It is interesting to note that CRA spared the appellant an
assessment of penalties for the claim of a fraudulent tax
credit. To this end, the Court commented that it was unclear
whether the appellant's participation in the tax fraud was as a
result of his complicity or having merely been duped. The
Court, however, did proceed to award costs against the appellant in
an amount of $300 for having pursued a meritless appeal supported
by a lack of truthfulness.
The charitable status of Operation Save Canada's Teenagers
has been revoked after the organization was unable to provide any
supporting documentation for alleged donations in excess of $6
million dollars. The appellant in Hassan v. R. was
just one alleged donor of the charity, all of whom have been
reassessed by CRA.
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