Recently, the Tax Court of Canada provided a judgment in Richard John Nixon and His Majesty the King, which deals with a leveraged donation arrangement that occurred in 2002 and 2003.  The judgment was dated August 22, 2023.    Even though the taxpayer said that his facts differed from those in the Kossow case, the TCC did not agree that the differences would result in a different outcome.

Here are some excerpts, but I would encourage people to read the whole TCC decision:

[6] Given the Appellant’s background as an officer of the Court[3], I find it disappointing that it is my conclusion that the Appellant attempted to mislead the Court. At times, the Appellant’s testimony defied common sense, and in particular concerning the loan from Talisker (described in detail below), bordered on the ridiculous.

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[9] While not much turns on this, I find the Appellant’s claimed interest in assisting the MacLaren Art Centre dubious, and most likely constructed at the time of trial. This conclusion is made, in part, because during the objection stage, when asked where the funds he claimed to have contributed to Berkshire were distributed, the Appellant wrote that his contributions were mingled, and he could not trace where they went. In cross-examination, he admitted that he never investigated whether he could have donated to MacLaren directly, and it appears that the Appellant has never donated to MacLaren in any form, despite, (by his own description) being very wealthy and interested in making donations.

,,,

[27] It is my finding that the arrangement reached between the Appellant and Talisker (or whomever negotiated on behalf of the promoters of Berkshire), demonstrate the absolute cynicism of the promoters, and the Appellant in this specific arrangement. The transactions particular to the Appellant seem to have occurred simply to create the appearance that the Appellant was impoverished as a result of his participation in Ideas, while ensuring that was not the case. The changes in the supporting documentation were also made to create the appearance that the loan transaction between the Appellant and Talisker was not related to his claimed gift to Ideas. A review of the objective evidence at trial show that this was not the case.[6]

[28] The Appellant’s counsel argues that “form matters”, and that I should not ignore the changes made to the loan document by the Appellant and Talisker, as well as the fact that the Appellant’s cheque went directly to Ideas. This argument carries very little weight. The evidence at trial showed that Talisker and the Appellant had no concern about the legal relationships created by the loan documentation. In 2002, Talisker provided $300,000 to the Appellant without accepting his loan application. In 2003 Talisker provided $297,000 to the Appellant without any documentation specific to the loan from the Appellant. Both amounts were transferred to the Appellant simultaneously with the delivery by the Appellant of his $300,000 cheque. Weeks later the Appellant completed a loan application for the funds he had already received.

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[35] I must therefore determine whether the Appellant received a benefit as a result of his participation in this transaction. At the outset of my analysis I can say that the answer to that question is a resounding yes.

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[45] Based upon the analysis set out above, I find that the Appellant, in both 2002 and 2003, did not make a gift entitling him to tax credits pursuant to section 118.1 of the Act.

[46] The Appeal is denied. Costs are payable by the Appellant.

 

It will be interesting to see if this decision is appealed.   The process for the Tax Court of Canada to dispose of these matters is very slow, as you can see.