By Ryan M. Prendergast

The Tax Court of Canada, in its September 11, 2025 decision in Toews v. The King, restored a taxpayer’s $39,398 charitable donation claim after the Minister of National Revenue (the “Minister”) had eliminated it on reassessment for alleged participation in a leveraged donation scheme (the “Scheme”).

The Minister argued that it could reassess David Toews’ 2008 taxation year despite the expiry of the normal reassessment period. The Minister further claimed that Mr. Toews was not entitled to the charitable donation amount claimed because certain individuals connected to the Scheme were liable for a penalty that had not been paid. The court considered three issues: (a) whether the Scheme constituted a tax shelter; (b) what is meant by being “liable to a penalty”; and (c) whether any of the four individuals assessed a penalty were in fact liable to one.

On the first issue, the court held that the Scheme constituted a tax shelter. On the remaining issues, an appeals officer at the Canada Revenue Agency (CRA) testified that four people – Mr. Ciccone, Karen Thomson‑Ciccone, Carmine Domenicucci and Thomas Johnson – were assessed penalties by the CRA in respect of the Scheme. It was noted that the assessment of a penalty does not equate to liability to a penalty but rather liability is to be determined by the requirements of the statutory provision that imposes the penalty.

Ultimately, the court allowed the appeal and held that, based on the evidence, none of the assessed persons were liable to a penalty and as such, the Minister could not reassess Mr. Toews for the 2008 taxation year beyond the normal reassessment period. As a result, Mr. Toews was allowed to claim the charitable amount in full. The reassessment was referred back to the Minister for reconsideration and reassessment.

This decision underscores the limits of the Minister’s authority to reassess beyond the normal reassessment period and represents a rare positive result for a taxpayer involved in a tax shelter. At the same time, it serves as a reminder for charities and donors alike that courts will closely scrutinize complex gifting programs that can appear too good to be true. Registered charities that participate in such arrangements could still be subject to penalties and revocation, which is exactly what happened to the charity involved in the Scheme in this decision.

​Read the September 2025 Charity & NFP Law Update