No Donation Receipt, No Tax Credit

Sunday, February 10, 2013

Case Citation

Sklodowski v. The Queen (2013 TCC 37) [TCC] [CanLII]

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 |

Cases Cited

Afovia v. The Queen (2012 TCC 391) [TCC] [CanLII]

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.

Splitting Pension Income, Pension Tax Credit

Friday, January 25, 2013

Case Citation

Talbot c. La Reine (2013 CCI 2) [TCC] [CanLII]

Summary

A taxpayer who hadn’t reached 65 years of age received a lump sum pension payment from his former employer. The amount isn’t eligible for either the split-income provisions between spouses or the pension tax credit.

For a taxpayer who isn’t 65, the only eligible pension income is

a payment in respect of a life annuity out of or under a superannuation plan, a pension plan or a specified pension plan.

There is an exception if the amount was received as a consequence of the death of a spouse.

Note: The case is reported in French. This write-up is based on my translation to English.

Issue

[4] The appellant subsequently received a T4A from the Hydro-Québec pension fund reporting that a lump sum payment of $13,691 had been paid in 2009. The appellant and his wife jointly elected to split the income in question and each claimed a pension credit of $2000. The issue is whether the lump sum payment of $13,691 paid to the appellant in 2009 as pension income can be split and give the rise to a pension credit.

ITA / ETA

paragraph 56(1)(a.2)
subsection 60(c)
section 60.03 [See below]
subsection 118(3) [See below]
subsection 118(7) “eligible pension income” [See below]
subsection 118(7) “qualified pension income” [See below]
subsection 118(8)
subsection 118(8.1)
248(1) “annuity”

Cases Cited

None.

Analysis

[11] Section 60.03 sets out the rules that determine the amount of pension that can be attributed to the spouse. This amount is included in the transferee spouse's income under paragraph 56(1)(a.2) and is deducted from the income of pensioner’s spouse under paragraph 60(c). Finally, subsection 118(3) provides that the transferee spouse may receive a pension credit under the formula.

[15] The amount of pension that can be split is established pursuant to paragraph 60.03(1) of the ITA. Under this paragraph, the "split pension amount" depends on a formula that takes into account the "eligible pension income" of the pensioner. According to this paragraph, "eligible pension income" has the meaning assigned by subsection 118(7) of the ITA.

[16] Under subsection 118(7) of the ITA, the "eligible pension income" of an individual under the age of 65 years is his "qualified pension income" received during the tax year.

[17] Under subsection 118(7) of the ITA, the "qualified pension income" received in a particular year is the total of the amounts referred to in subparagraph(a)(i) of the definition of "pension income" as well as the amounts referred to in subparagraphs (a)(ii) to (vi) and paragraph (b), the latter being, however, only included if they are received as a consequence of the death of a spouse. Therefore, in this case, the appellant's only income that may be split under subsection 60.03(1) of the Act is that referred to in subparagraph (a)(i) of the definition of "pension income", that is, a payment in respect of a life annuity out of or under a superannuation plan, a pension plan or a specified pension plan.

[18] Subsection 118(8) of the Act excludes certain pension income as defined in subsection 118(7). Paragraph (e) excludes a payment:

a payment received out of or under a salary deferral arrangement, a retirement compensation arrangement, an employee benefit plan or an employee trust;

[19] In my opinion, any payment received under a retirement compensation arrangement is expressly excluded from the application of the splitting of pension income.

Decision

[22] In this case, the annual benefit received by the appellant is not an annuity, so the lump sum payment of $13,691 paid for the 2009 tax year cannot be split between spouses.

[24] In my opinion, the annual payment received by the appellant under the agreement between him and his employer is not subject to pension income splitting between spouses and does not qualify for the pension credit.

Note

A paragraph beginning with a number in square brackets is a direct quote from the case.