Mr. Berg "invested" in a charity scam. He gave a Canadian charity "Cheder Chabad" offshore time share units for a receipt which was about 10 times his actual cost of the time share units.
"... Mr. Berg understood from the outset that the series of interconnected and pre-arranged transactions ... were designed to mislead tax officials as to the [fair market value] of the property transferred to Cheder Chabad. This was done solely for the purpose of receiving inflated tax receipts and claiming inflated tax credits. Nor can there be any doubt that Mr. Berg’s participation in the scheme was conditional upon him receiving the pretence documents to support his inflated claims." (Para. 24.)
The trial judge had said that "Mr. Berg had received no benefit beyond the inflated tax receipts." And so, relying on decided cases, which said that a tax receipt is not a benefit, the judge said "that Mr. Berg was entitled to claim a charitable tax credit to the extent that he was actually impoverished by his purchase and subsequent transfer of the timeshare units..." (Paras. 14-15.) So, the TCC judge allowed Mr. Berg a tax credit for the amount of cash he actually spent to buy the time share units, though not for the inflated amount of the receipt. The FCA did not agree.
Relying on its own decisions in Maréchaux v. The Queen, 2010 FCA 287 (CanLII), and Kossow v. Canada, 2013 FCA 283 (CanLII), the FCA said that Mr. Berg got a benefit from the promoters as part of the deal. The benefit was the "pretence documents" from the promoters that showed (falsely) that the time share units were worth much more than Mr. Berg had paid. So, Mr. Berg had not made a true gift and was not entitled to any tax credit. (Para. 28.)
In that conclusion, the FCA decision is easy to understand. But the FCA added that a taxpayer who intends to profit from donation tax credits that exceed his cost has not truly made a gift and cannot claim a tax credit. This view seems to differ from past comments of the courts. One might understand it by presuming the FCA was restricting the point to scams like Mr. Berg's. But if that is the FCA's view, then it could have decided Maréchaux and Kossow the same way. Instead, in those cases the FCA looked at whether low-interest promissory notes were a benefit back to the donor that voided the gift.
The FCA's logic in those earlier cases is much harder to understand than the simpler idea, here in Berg, that a person who makes a gift to a charity at inflated values, expecting to get more back in tax credits than he gives, hasn't made a gift and isn't entitled to a tax credit:
" The Crown is entitled to succeed for a further reason. In my view, it was not open to the judge on this record to conclude that, at the time of the transfer of the timeshare units to Cheder Chabad, Mr. Berg had the requisite donative intent for the purposes of section 118.1 of the Act. In my view, Mr. Berg did not intend to impoverish himself by transferring the timeshare units to Cheder Chabad. On the contrary, he intended to enrich himself by making use of falsely inflated charitable gift receipts to profit from inflated tax credit claims."
See Canada v. Berg, (2014 FCA Near)