Tax Court Denies Appeal of Reassessment for Lack of Donative Intent

By Ryan M. Prendergast

June 2024 Charity & NFP Law Update
Published on June 27, 2024



Bacchus v. The King, decided on May 8, 2024, involved the Appellant, Wayne Bacchus, a lawyer, who was challenging notices of reassessment made by the Minister of National Revenue (the “Minister”) in the 2005-2007, 2009 and 2012-2014 taxation years.

While originally assessed as filed for those years, the Minister reassessed him to disallow donation tax credits made to the Global Learning Gifting Initiative (“GLGI”), under ss. 118.1(1) of the Income Tax Act (“ITA”). The Appellant had donated over $100,000 over this period to GLGI, including both cash donations and gifts-in-kind. He sought to challenge the Minister’s disallowance of the cash donations, specifically on the grounds that the Canada Revenue Agency did not interview him regarding his subjective donative intent, and had unfairly determined his subjective donative intent based on other participants in GLGI, stating that this was a breach of the rules of natural justice and the Canadian Charter of Rights and Freedoms.

The issue was whether the Appellant was entitled to donation tax credits for the cash donations. The Minister made the following factual assumptions in the Reply to the Notice of Appeal:

  1. GLGI Program was a tax shelter, promoted on the basis that participants would be entitled to receive tax credits, sometimes equal up to 112% of the cash donation;
  2. Participants in GLGI were to become capital beneficiaries of a trust and would receive educational courseware that would subsequently be donated to the charities;
  3. Participants were automatically approved as capital beneficiaries but did not take possession of the courseware, which had no actual value;
  4. The tax receipts which participants received reflected the value of the cash donation and alleged value of the courseware, which had no value, making them inflated tax receipts.

The Minister was of the opinion that participants in GLGI did not have donative intent when they made cash donations to obtain tax credits in excess of the cash donation value, indicating an intent to profit. As the courseware had no value, participants were relying on inflated donation receipts.

The Court found that the Appellant had failed to establish a prima facie case that the Minister’s assumptions were incorrect. Given his review of the informational brochures, the Court concluded that the Appellant understood there would be a cash-flow advantage in the scheme to a ratio of 5:1, and that his participation would allow him to receive tax refunds exceeding the value of the cash donations. The Court found that a necessary element of a “gift” (which is undefined by the ITA) requires “impoverishment for the benefit of a qualified donee. If any of these elements are lacking, donative intent will be vitiated.” As the Appellant’s intent was not to impoverish himself, but to gain a benefit, this vitiated the donative intent. In a previous ruling from 2015 the Court had also reviewed the GLGI program and concluded that the alleged gifts failed because of the financial advantage received by participants.

The Court concluded that the appeal should be dismissed.  Bacchus stands as a reminder to taxpayers to always be weary of any promise of benefits that are too good to be true through charitable giving programs or initiatives, even if they are registered with the CRA as tax shelters. Individuals with questions about charitable donations and their subsequent tax treatment should be sure to do so with the guidance of reputable tax and legal professionals.  


Read the June 2024 Charity & NFP Law Update