Kaul v. The Queen - Tax Court of Canada and appraisal of FMV when gifting scheme

February 27, 2019 | By: .(JavaScript must be enabled to view this email address) Mark Blumberg
Topics: What's New from the Charities Directorate of CRA, Canadian Charity Law, Receipting by Canadian Registered Charities

In the Tax Court of Canada case Kaul v. The Queen, CRA denied certain claims for tax credits relating to an art donation scheme.  The taxpayers appealed and the Tax Court of Canada sided with CRA.  There is lots of discussion around valuation reports, fair market value and art work. 

The judge said that he was not impressed with the valuators and their valuation.  "Although they purported to be professional members of the American Society of Appraisers, they failed to live up to the standards and qualifications of the organization, or USPAP. They both just skated over USPAP and would not even acknowledge their mistakes.  ....in particular, attempted to avoid answering the obvious repeatedly. When the answers were obvious; he simply tried to bluster his way out of the presentation."

The judge noted that the valuators "(1) they did not refer to prior sales of the property; (2) there is no reference to providence; (3) there was multiples of the same print bought and dated; (4) there was no reference to the price paid by the donors; (5) the use of the art was not considered; and (6) no consideration was given to the impact of the flooded market place."

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