Topics: What's New from the Charities Directorate of CRA, Canadian Charity Law, Receipting by Canadian Registered Charities
The Tax Court of Canada in Isah, A. v. The Queen (TCC) deals with donations disallowed by CRA and the court ultimately decided to impose gross negligence penalties on the taxpayer who submitted fake official donation receipts.
The Court discuss the test for gross negligence:
…‘Gross negligence’ must be taken to involve greater neglect than simply a failure to use reasonable care. It must involve a high degree of negligence tantamount to intentional acting, an indifference as to whether the law is complied with or not. I do not find that high degree of negligence in connection with the misstatements of business income. To be sure, the plaintiff did not exercise the care of a reasonable man and, as I have noted earlier, should have at least reviewed his tax returns before singing them. A reasonable man in doing so, having regard to other information available to him, would have been led to believe that something was amiss and would have pursued the matter further with his bookkeeper.
The Court concluded in assessing gross negligence penalties:
 In this case however the mis-statements in the 2011 return are the claims for deduction for charitable donations to World Vision and to Heat & Stroke in the respective amounts of $2,533.86 and $2,464.08. I do not think the Appellant, who represented himself in this matter, would have had a problem in spotting these wrong amounts if he had taken time to review the return (as he said he did not) before signing it. I think that these two false statements would have been obvious to him, as they would have been to almost anyone in reviewing that return. The Appellant was completely aware that he had had no intention of donating any such amounts to these two charitable institutions.
 Accordingly I do find that the Respondent has met its burden of proof, through cross-examination of the Appellant, that the false statements in the return as established by the evidence of Mr. Mitchell and Ms. Brown, were made, participated in, assented to or acquiesced in through gross negligence of the Appellant.
What a shame that 2 charity officials had to attend at court to testify in this matter.
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Mark Blumberg is a partner at the law firm of Blumberg Segal LLP in Toronto and works almost exclusively in the areas of non-profit and charity law.