McPherson v. The Queen, 2006 TCC 648, is yet another tax shelter/donation case that has turned out badly for the donor, so far at least (the case is under appeal).
In this scheme, a participant would make a donation and receive back a gift or “contribution top-up” from an anonymous donor. In other years, the participant would receive “loan” to be repaid in 30 years. The Tax Court judge, ¶4 of his reasons, referred to these amounts as “kickbacks”. It was all down hill from there for the appellant in this particular case even though the Crown apparently could not prove beyond doubt that the taxpayer received his kickback.
The facts of this case were particularly unfavourable to the appellant, but what is interesting (or troubling, depending on your perspective) is the emphasis placed on “donative intent” by the trial judge:
[20] There is an element of impoverishment which must be present for a transaction to be characterized as a gift. Whether this is expressed as an animus donandi, a charitable intent or an absence of consideration the core element remains the same.
Arguably, intent is not relevant to whether a gift has been made at common law, but the trial judge may have been influenced to rely on intent because of his findings of fact, which made it clear that the appellant, before he made the rather large donations under appeal, had not evinced much interest in charitable activities. Or it might be that the judge was influenced by the fact the appeal before him involved an infamous (because wildly unsuccessful) tax-scheme promoter.
In any case, it will be interesting to see what the Federal Court of Appeal makes of the case. For other, related cases see Webb v. The Queen, 2004 TCC 619, and Doubinin v. The Queen, 2004 TCC 438.
