Robert Kepes of Morris & Morris LLP reports that the Federal Court of Appeal today dismissed the taxpayer’s appeal in Maréchaux v. The Queen, 2009 TCC 587, a case which I wrote about here. Apparently, the taxpayer’s counsel struggled valiantly, but the Court, after listening to him, took a 15-minute break and then rendered a decision from the bench without hearing from the Justice lawyer.
Robert says that the Court, in its oral reasons, found as follows (my comments are in square brackets):
- Benefits from third parties other than the donee-charity can vitiate a gift and no decided case says otherwise. [In fact, in Rickerd v. M.N.R., [1980] D.T.C. 1838, the Tax Review Board seemed to hold that a benefit need not flow from anyone for it to vitiate a gift.]
- The interest-free loan was a benefit, and it was provided in return for the purported gift.
- Providing the put option was also a benefit because the put allowed the donors to avoid liability under the loan by transferring the deposit and insurance policy to the lender.
- The cash transferred to the charity was not a gift because it was part of a connected series of transactions. The donation of cash was made only because of the grant of the interest-free loan. [That is, the Federal Court of Appeal affirmed Justice Woods’ finding, at ¶49 of her decision, that the scheme represented “just one interconnected arrangement.” This reasoning also seems to be of a piece with the approach taken by the Tax Court to certain other charity schemes where the cash is treated as the price to be paid for entry into the scheme.]
- The verdict: 100% of the donation (cash and loan) was denied.
