Date: 19980617
Docket: A-48-95
CORAM: STRAYER, J.A.
McDONALD, J.A.
HENRY, D. J.
BETWEEN:
HER MAJESTY THE QUEEN
Appellant,
(Respondent),
- and -
DENNIS J. BRADLEY,
Respondent,
(Appellant).
HEARD at Toronto, Ontario, June 16, 1998
JUDGMENT delivered from the Bench at Toronto, Ontario, June 16, 1998
REASONS FOR JUDGMENT BY: STRAYER, J.A.
Date: 19980617
Docket: A-48-95
CORAM: STRAYER, J.A.
McDONALD, J.A.
HENRY, D. J.
BETWEEN:
HER MAJESTY THE QUEEN
Appellant,
(Respondent),
- and -
DENNIS J. BRADLEY,
Respondent,
(Appellant).
REASONS FOR JUDGMENT
(Delivered from the Bench at Toronto, Ontario
on June 16, 1998)
STRAYER, J.A.
1� In the judgment under appeal, the Tax Court Judge held that the amount of $98,867.00 deducted by the respondent in the 1984 taxation year as a charitable gift in the form of a partial forgiveness of a loan to a museum, a charitable organization, could not be a gift because there was in fact no loan to be forgiven. He held, however that the Minister could not reassess the respondent for 1984 because that year was statute-barred. Thus, the respondent's claim of total charitable donations in his 1984 return in the amount of $178,357, including the purported loan forgiveness of $98,867, could not be reassessed. The result was that the taxpayer's charitable gift deduction of $111,237, being 20% of his income, could not be altered. However, the Tax Court Judge dismissed the respondent's appeal concerning the 1985, 1986 and 1987 taxation years to the extent that these were based on later purported forgiveness of instalments of the same loan held by the Court to be non-existent.
2� In closing the learned Tax Court Judge added the following:
If the Minister is not permitted to reopen 1984, the Appellant is left with his aggregate charitable donations of $178,357 for that year. If the Appellant does not have adequate income in 1984 to absorb all of those charitable donations, he should be able to carry forward to subsequent years any 1984 donations not used for income tax purposes in that year. The dismissal of the appeals for 1985, 1986 and 1987 will be subject to that condition.
3� He issued judgement accordingly and the only issue before us is the Minister's argument to the effect that the forgiveness of a non-existent loan cannot be taken into account in any carry-forward of charitable gifts for the years following 1984, even though the Minister could not reassess the deductions taken in 1984.
4� We are all of the view that the Tax Court Judge erred in law on this issue in assuming for carry-forward purposes that the "aggregate charitable donations" of 1984 were $178,357.
5� The entitlement to carry forward charitable donations as deductions from income arises under paragraph 110(1)(a) of the Income Tax Act which provides, effective 1985, as follows:
110.(1) Other deductions permitted. -- For the purpose of computing the taxable income of a taxpayer for a taxation year, there may be deducted such of the following amounts as are applicable:
(a) charitable gifts. -- the aggregate of gifts made by the taxpayer in the year (and in the 5 immediately preceding taxation years to the extent of the amount thereof that was not deducted in computing the taxable income of the taxpayer for any preceding taxation year) ...
It will be noted that the deductible amount is calculated by determining first the "aggregate of gifts made by the taxpayer" in preceding years and then subtracting from that aggregate the amount already deducted from income.
6� It appears to us that in, for example, an assessment made in respect of 1985 taxes the Minister is obliged, in considering the amount to be carried forward, to determine the aggregate of "gifts" made in previous years and this must in the context be confined to qualifying charitable gifts. In this case, the Tax Court Judge determined that the sum allegedly given to the Museum in 1984 (purportedly $98,867) was not a gift because there was no loan which could have been forgiven by the respondent. Therefore in calculating, for purposes of carry-forward in subsequent years, the aggregate of gifts made in 1984, as required by paragraph 110(1)(a), that aggregate cannot include the invalid amount of $98,867. This would leave an aggregate of $178,357.00 (the total reported) minus $98,867 (the invalid amount), that is $79,490.00 and not $178,357 assumed by the Tax Court Judge. As $111,237 was already deducted in 1984 there remains no balance to carry forward to subsequent years. We believe this result to be consistent with previous jurisprudence of the Federal Court and the Tax Court[1]. Unless statute-barred, the Minister is obliged to assess each year in accordance with the Act.
7� Therefore the appeal will be allowed and the judgment of the Tax Court revised accordingly.
"B.L. Strayer"
J.A.
FEDERAL COURT OF CANADA
Names of Counsel and Solicitors of Record
DOCKET: A-48-95
STYLE OF CAUSE: HER MAJESTY THE QUEEN
- and -
DENNIS J. BRADLEY
DATE OF HEARING: JUNE 16, 1998
PLACE OF HEARING: TORONTO, ONTARIO
REASONS FOR JUDGMENT BY: STRAYER, J.A.
Delivered from the Bench at Toronto, Ontario
on Monday, June 16, 1998
APPEARANCES:
Mr. Harry Erlichman
Mr. David Chodikoff
For the Appellant
Mr. Geoffrey B. Shaw
For the Respondent
SOLICITORS OF RECORD:
George Thomson
Deputy Attorney General
of Canada
For the Appellant
Cassels, Brock & Blackwell
Scotia Plaza
2100 - 40 King Street West
Toronto, Ontario
M5H 3C2
For the Respondent
FEDERAL COURT OF APPEAL
Date: 19980617
Docket: A-48-95
BETWEEN:
HER MAJESTY THE QUEEN
Appellant
-and-
DENNIS J. BRADLEY
Respondent
REASONS FOR JUDGMENT
[1]See e.g.: Sogemines Development Company Limited v. M.N.R. (1972) 72 D.T.C. 6254 at 6261-62 (F.C.T.D.); Roywood Investments Ltd. v. H.M. (1979) 79 D.T.C. 5451 at 5457, (F.C.T.D.) affirmed 81 D.T.C. 5148 (F.C.A.); Coastal Construction and Excavating Limited v. H.M. (1996) 97 D.R.C. 26 at 31-2 (T.C.C.)