Date: 20050502
Docket: A-189-04
Citation: 2005 FCA 158
SEXTON J. A
EVANS J. A.
BETWEEN:
FRANK KLOTZ
Appellant
and
HER MAJESTY THE QUEEN
Respondent
Heard at Toronto, Ontario, on May 2, 2005.
Judgment delivered from the Bench at Toronto, Ontario, on May 2, 2005.
REASONS FOR JUDGMENT OF THE COURT T BY: SEXTON J.A.
Date: 20050502
Docket: A-189-04
Citation: 2005 FCA 158
CORAM: LINDEN J. A.
SEXTON J. A
EVANS J. A.
BETWEEN:
FRANK KLOTZ
Appellant
and
HER MAJESTY THE QUEEN
Respondent
REASONS FOR JUDGMENT OF THE COURT
(Delivered from the Bench at Toronto, Ontario, on May 2, 2005)
[1] The Appellant (the "taxpayer) appeals from the decision of Bowman A.C.J. (as he then was) who dismissed the appeal of the taxpayer.
[2] The taxpayer purchased 250 art prints in bulk from the promoters of an art donation program called "Art for Education"(the "promoters"), who had in turn acquired the prints from the artists. The promoters had established a business in supplying art to purchasers whose sole intention was to donate the art for the purpose of obtaining charitable deductions. Some 660 Canadian taxpayers purchased approximately 63,000 prints, which had been purchased by the promoters at prices varying from $5 to $50.
[3] The promoters instructed their buyer to purchase prints having a value of $1000 each for a price not exceeding $50. The promoters then arranged for an appraisal which valued most of the prints at $1000 each, and sold them to the taxpayers at prices in the $300 range. Taxpayers could acquire prints from the promoters at lower prices by purchasing them in larger volumes. In the instant case, the taxpayer purchased the 250 prints for approximately $75,000. The prints were then immediately donated, sight unseen, to Florida State University. A charitable deduction of $258, 400 based on the arranged calculation was subsequently claimed by the taxpayer and then disallowed by the Minister, who allowed a deduction in the amount at which the taxpayer had purchased the prints from the promoters.
[4] The Tax Court Judge refused to accept the appraisal evidence of the taxpayer of the fair market value of the prints, on the basis that the appraiser had examined the wrong market. He held that the "magnitude of the mass market art donation program created its own market", and that the relevant market was not, as the taxpayer alleged, retail art galleries where pieces of art are sold individually.
[5] The Tax Court Judge held that even if the retail art galleries were the proper market, the evidence adduced by the taxpayer did not justify the fair market value that he claimed. The Judge found, for example, that the evidence of actual sales of identical or similar prints was virtually non-existent.
[6] In the result, the Tax Court Judge held that the best evidence of the fair market value of the prints was the price paid by the taxpayer- that is $ 75,000.
[7] The Appellant argued that the Tax Court Judge made a legal error in refusing to find fair market value based on the retail market (ie. sales by art galleries of just one print at a time). We disagree.
[8] Fair market value and how it is calculated are questions of fact. The determination of the appropriate market is part of determining fair market value and is an issue of fact: (CIT Financial Ltd. v. Canada, 2004 FCA 201 at paragraph 13, Connor v. R., [1979] C.T.C. 365 at 366 (F.C.A.), R. v. Friedberg, 92 D.T.C. 6031 at 6034 (F.C.A.), R. v. Pustina, 2000 D.T.C. 6001 at 6009, paragraph 39 (F.C.A.), leave to appeal denied, 266 N.R. 393 (note).).
[9] We are unable to conclude that, in determining the fair market value of the prints, the Tax Court Judge made any error of law, or any palpable and overriding error in his findings of fact.
[10] For these reasons, the appeal will be dismissed with costs. In light of this decision, the cross-appeal has become moot and will be dismissed without costs.
"J. E. Sexton"
J.A.
FEDERAL COURT OF APPEAL
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: A-189-04
STYLE OF CAUSE: FRANK KLOTZ
Appellant
and
HER MAJESTY THE QUEEN
Respondent
PLACE OF HEARING: TORONTO, ONTARIO
DATE OF HEARING: MAY 2, 2005
REASONS FOR JUDGMENT
OF THE COURT: (LINDEN, SEXTON, EVANS JJ.A.)
DELIVERED FROM THE
BENCH BY: SEXTON J.A.
APPEARANCES:
Douglas H. Mathew
Thomas M. Boddez FOR THE APPELLANT
Arnold H. Bornstein
P. Michael Appavoo FOR THE RESPONDENT
SOLICITORS OF RECORD:
Thorsteinssons
Vancouver, BC FOR THE APPELLANT
John H. Sims, Q.C.
Deputy Attorney General of Canada FOR THE RESPONDENT