Unbeknownst to the givers, the charity was being investigated by the Canada Revenue Agency. (Photo: iStock)
Oh what a tangled web we weave when first be practice to deceive.
The Supreme Court of Canada has just rejected to hear an appeal by a group of charitable givers who appealed a federal court decision not to allow them to be able to write off their charitable donations from their taxes.
The group was persuaded by their tax preparer to give to a charity called CanAfrica in 2006. Unbeknownst to the givers, the charity was being investigated by the Canada Revenue Agency, which took away the organization’s charitable status in 2007.
CanAfrica gave each of the givers sizeable tax receipts, ranging from $2,500 to $20,000. The only problem was that the givers didn’t really spend anywhere near the amounts for which the receipts were issued. They each spent only 10 per cent of the value of the receipts plus commission to their tax preparer.
The Ministry of National Revenue refused to allow the givers to claim tax credits for the receipts, saying that they were inflated and the donations were only made to enrich themselves.
The givers appealed the ministry’s decision to the Tax Court of Canada, which was of the opinion that the givers were entitled to claim a tax credit, because in the court’s opinion the tax receipts were not benefits but gifts, which are allowed to be deducted under the Income Tax Act of Canada.
The ministry then brought an appeal to the Federal Court of Appeal. The appeals courts cut it down to the simplest terms, saying, “a tax credit cannot exceed the amount of the gift.”
In other words, the tax receipts were indeed invalid, because they contained the incorrect amount and this violated not only the act but also the regulations that support the act. In fact, the court found that because the receipts stated the wrong amount of cash gift, they were “spoiled receipts.”
After the appeal court rejected the validity of the receipts and found the givers were not entitled to tax credits, they then tried to appeal to the Supreme Court of Canada but the court shot their appeal down.
There you have it folks, if you want to be able to claim your charitable donation at tax time, make sure your receipt states the correct amount.