" The reasons of the Federal Court of Appeal in Berg confirm that the receipt of a benefit will negate a gift. However, the Court did not comment on the conclusion reached by the Tax Court that an inflated tax receipt is not a benefit. Instead, Near J.A. concluded that Mr. Berg had not made a gift because he had received a benefit in the form of transaction documents that were designed to mislead tax officials (Berg, paragraphs 27, 28). In light of this conclusion, the Federal Court of Appeal did not consider whether an inflated tax receipt is a benefit.
" Based on these comments, I would conclude that the issuance of an inflated tax receipt should not usually be considered a benefit that negates a gift."
(New ITA s. 248(31) "Eligible amount of gift or monetary contribution" might allow the same result, now.)
This victory may not help other taxpayers, though. The Crown also complained that the taxpayers could not prove that they truly intended to make a gift (rather than buy an inflated tax receipt.) Justice Woods dismissed this CRA complaint on a technicality. The Crown will likely avoid this mistake in the future:
" Before concluding on this issue, I would comment that the respondent raised another argument at the hearing that was not mentioned in the replies. It was submitted that the appellants did not establish (except perhaps Mr. David) that they had donative intent. The appellate court decision in Berg confirms that this is a requirement to have a valid gift (at paragraph 29).
" In my view, it would not be fair to decide the appeals based on this argument. The appellants did not have prior notice of it, and accordingly they did not have a chance to prepare and introduce evidence on the point."
(See also new ITA s. 248(30) "Intention to give" on this point.)
See David v. The Queen, (2014 TCC Woods)