This case deals with an appeal in the Tax Court of Canada by Ronald van der Steen with respect to an approximately $65,000 donation to a registered charity the Canadian Literacy Enhancement Society (“CLES”).  CRA disallowed the claim of the tax credit for the donation and also levied a penalty under subsection 163(2) of the ITA dealing with ‘knowingly, or under circumstances amounting to gross negligence, make a false statement in a tax return’.  The case is lengthy but the court sided with CRA in disallowing the tax credit but set aside the penalty.  You can read the full case here.

The decision notes:

[3]  In auditing the numerous taxpayers who made donations to CLES, the CRA discovered that some of them were told by a representative of CLES that they (or an entity controlled by them) could expect to receive a payment (which the CRA calls a “kickback”), generally corresponding to approximately 70% of the amount donated. One of the fundamental questions in respect of this Appeal is whether Mr. van der Steen was told that he would receive a kickback in respect his $65,000 payment to CLES.  …