Sunday, February 10, 2013
Case Citation
Summary
The taxpayer claimed tax credits for cash donations to two churches. There were two problems with the claims. First, the taxpayer had no receipt as required under subsection 118.1(2) of the Income Tax Act. Second, an audit of the churches showed receipts being issued for amounts far in excess of amounts received. In short, it appears there was a scam.
The court confirms a donation tax credit will not be allowed if the receipt does not meet the prescribed requirements as set out in Regulation 3501(1).
Issue
[16] Are Mr. Sklodowski and Mr. Ashbert entitled to tax credits based on charitable cash donations of $6,000 and $8,000 by Mr. Ashbert in 2006 and 2007 to The Redemption Power International Ministry and The Christ Healing Church respectively and of $9,250 by Mr. Sklodowski in 2007 to The Christ Healing Church?
ITA / ETA
| 118.1(2)—Proof of gift |
| 118.1(3)—Deduction by individuals for gifts |
| PART XXXV—GIFTS—3500 |
| PART XXXV—GIFTS—3501 |
| 118.1(3)—Deduction by individuals for gifts |
| PART XXXV—GIFTS—3500 |
| PART XXXV—GIFTS—3501 |
Cases Cited
Analysis
[17] The Respondent argues that they are not entitled to such credits for two reasons:
a) first, the receipts provided by Mr. Sklodowski and Mr. Ashbert to support the credits do not contain the requisite prescribed information;
b) second, Mr. Sklodowski and Mr. Ashbert have not proven they made the cash donations.
[18] Section 118.1(2)(a) of the Income Tax Act (the "Act") reads:
118.1(2) A gift shall not be included in the total charitable gifts, total Crown gifts, total cultural gifts or total ecological gifts of an individual unless the making of the gift is proven by filing with the Minister
(a) a receipt for the gift that contains prescribed information;
[21] In the recent case of Afovia v. Her Majesty the Queen,[1] Justice Paris dealt with both these issues. He had this to say about the receipt requirements:
9. The question that must be decided by this Court is whether it is mandatory that a charitable donation receipt contain all of the information listed in subsection 3501(1) of the Regulations, including a serial number and the name and Internet website of the Canada Revenue Agency. On the basis of the clear wording of that provision, I find that all of the information listed there is mandatory. The material portion of the section states that “every official receipt issued by a registered organization . . . shall show clearly in such a manner that it cannot be readily altered . . .” the information listed in paragraphs (a) to (j).
14. The fact that the appellants were unaware of what information was required on a charitable receipt cannot relieve them of the obligation to support their claim for the charitable donation tax credits with official receipts that contain the prescribed information. This Court is bound by subsection 118.1(2) of the Act.
Decision
[25] Something is rotten in the state of Denmark, but I have insufficient evidence to pinpoint exactly what. I do, however, have enough evidence to find both that the receipts are deficient and also that Mr. Sklodowski and Mr. Ashbert did not make the cash donations claimed. The Appeals are therefore dismissed.
Note
A paragraph beginning with a number in square brackets is a direct quote from the case.
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