The Honourable Justice Guy R. Smith dismissed an appeal on the Banyan Tree Foundation matter. This goes back to 2002 and donations that CRA was alleging were part of an abusive charity gifting tax scheme. Here is a copy of the judgment on Banyan Tree Foundation case 2022.
Here are some of the paragraphs that were most interesting.
[191] The Appellants argue that subsection 248(31) “allows for split gifting where the donor receives some advantage in return” for the gift made and that “the amount eligible for the gift is the excess of the fair market value of the property transferred over the advantage received.” It is argued that paragraphs 248(30)(a) and (b), and subsection 248(31), “when read together” provide that “so long as the advantage does not exceed 80% or if the Minister is satisfied that the transferor intended to make a gift, the transfer will remain a gift less the amount of the advantage.”
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[204] In Reply Submissions, the Appellants argue that if lack of donative intent was fatal to finding a gift pursuant to paragraph 248(3)(a), “it would have been absurd to enact paragraph 248(30)(b) as those two subsections are disjunctive.”
[205] The Appellants argue finally, that “if the advantage is less than 80%, then (…) donative intent is not required” because otherwise “it would not be necessary to provide for an 80% threshold and any enactment in that regard would be absurd.”
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[215] As previously explained, the word ‘gift’ is not defined in the Act but has generally been described as a voluntary and gratuitous transfer of property by a donor without any expectation of an economic advantage or benefit. Imbedded in this definition is the notion of ‘donative intent.’
[216] Subsection 248(30) does not explicitly contain the expression ‘donative intent’ but it is titled ‘intention to give.’ It provides that the existence “of an advantage in respect of a transfer of property does not in and by itself disqualify the transfer from being a gift” subject to paragraphs (a) and (b). The Explanatory Notes indicate that the existence of an advantage “will not necessarily disqualify the transfer (…)” [My Emphasis]. The wording invites further investigation.
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[227] Subsection 248(31), provides that the “eligible amount of the gift” is the difference between the fair market value of “the property that is the subject matter of the gift” and “the amount of the advantage.” Subsection 248(32) then provides a statutory framework to determine the “amount of the advantage.”
[228] Paragraph 248(32)(a) is broadly worded and is intended to capture “all amounts,” including “any property, service, compensation” that is “received, obtained or enjoyed (…) either immediately or in the future and either absolutely or contingently (…)” that is linked to “the gift or monetary contribution” by the application of subparagraphs (i), (ii) or (iii).
[229] The Court has already concluded that the loan offered to participants of the Program was a substantial benefit. It is apparent that the loan was “consideration for the gift” or “in any way related to the gift” in accordance with subparagraphs 248(32)(a)(i) or (iii). I am satisfied that the Lender would not have extended the loan, were it not for the cash outlay paid directly to Banyan. It is not disputed that the loans ranged from 85.5% to 89% of the entire gift amount and thus the 80% threshold set out in paragraph 248(30)(a) was clearly exceeded.
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VI. Conclusion
[270] For all the foregoing reasons, the appeals are dismissed.
[271] In accordance with the Consent Agreement filed on December 15, 2020, the Court orders that each party shall bear their own costs in these appeals.
Signed at Ottawa, Canada, this 31st day of March 2022.