Here is a copy of The Valuation Law Review - Vol 17 Issue 2 September 2011 Taxation Decisions of The Canadian Institute of Chartered Business Valuators (CICBV). In this edition it discusses Marechaux, Lemberg, Lockie, Innovative Gifting and Russell and we have been able to reproduce the whole journal with the permission of the CICBV. The editor is Dennis Turnbull, CBV.
“Valuation Law Review Volume 17, Issue 2, copyright by The Canadian Institute of Chartered Business Valuators, http://www.cicbv.ca 277 Wellington St. West, Suite 710, Toronto, ON, M5V 3H2, is reproduced with permission.”
Here are some blurbs from the Valuation Law Review with more details in the edition at The Valuation Law Review - Vol 17 Issue 2 September 2011.
Lemberg, et al. v. Perris
Ontario Superior Court of Justice, June 30, 2010 (Docket: 682/07)
The plaintiffs sued their accountant for breach of fiduciary duty. They had relied on his recommendation to invest in an ultimately unsuccessful artwork charitable donation scheme. Subsequent to the
dismissal of a Tax Court test case on the scheme they discovered that their accountant had received an undisclosed commission for inducing them to invest in the tax avoidance program. They sued him for breach of his fiduciary duty to them. The Court found for the plaintiffs.
Innovative Gifting Inc. and the House of the Good Shepherd, et al.
Ontario Superior Court of Justice  O.J. No. 2210
Innovative Gifting Inc. sought court approval to enforce a written agreement with the respondent charities for the payment of fees for services rendered. Gifting had promised to secure donations of cash and shares for the charities in exchange for a fixed percentage of the donations. The respondents claimed that Gifting had made material and fraudulent misrepresentations to them about the nature of the donations, the legality of its gift-giving program, and the fees to be charged. The Court decided that the agreements between Gifting and the respondents were void or voidable because they were contrary to public policy, stating that Gifting’s scheme of promising donations of allegedly valuable shares which were worthless or never provided, and requiring fictitious tax receipts for shares that were never donated, was fraudulent.
Elizabeth M. Russell, et al. v. The Queen
2010 TCC 548
An art donation case essentially indistinguishable on the facts from Nash, Klotz, and Nguyen (reviewed in the prior issues of this publication). The Appellants attempted, unsuccessfully, to convince the Tax Court that all of the previous decisions on this issue had been incorrectly decided because the Courts had used the wrong reference market in valuing the artwork. The Court concluded that there was no comparable reference market in the commercial art industry because the market in which the parties were operating was not an art market but was a charitable receipt market and that the price the Appellants paid for the art was the correct fair market value.
Robert D. G. Lockie v. The Queen
2010 TCC 142
A charitable donation decision where the gifted items were gel pens, toothbrushes and school packs. The charity issued donation receipts to the Appellant at an amount over five times greater than his actual cost for the items. At trial the Appellant presented expert testimony which defended the claimed donation amount on the basis that the fair market value of the items should be based on their Canadian retail level selling prices. The Tax Court concluded that the charity could have purchased the donated items directly from the same vendor used by the Appellant and paid the same price as the Appellant. The Tax Court therefore only allowed the Appellant a fair market value equal to his actual cost. This decision has been appealed to the Federal Court of Appeal.
Maréchaux v. The Queen
2009 TCC 587
2010 FCA 287
Application for Leave to Appeal to the Supreme Court of Canada dismissed
This was the first Tax Court decision regarding the “levered donation” charitable donation programs. The Appellant had made a cash donation from his own funds of $30,000 and received a donation receipt for $100,000. The $70,000 difference between the two amounts was financed through a twenty year interest free loan. At trial the Crown argued that the Appellant had not made a gift because he had received back valuable consideration, being the financing arrangement. The Tax Court agreed with the Crown’s position and denied the appeal. Mr. Maréchaux appealed to the Federal Court of Appeal (FCA) which confirmed the Tax Court decision. Mr. Maréchaux filed for Leave to Appeal at the Supreme Court of Canada. His application for Leave to Appeal was dismissed with costs on June 9, 2011.
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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.