THE LAWYERS WEEKLY
March 18, 2011 | 9
Leveraged
donation
programs
Tax Court delivers
smackdown to
participating donor
Leveraged donation programs sound
like the perfect option for budding philanthropists: Put $100 in, get $160 back, and
your favourite charity gets a large donation. A win-win scenario? Not according to
the Canada Revenue Agency.
No good deed goes unpunished —that
is what Canadian taxpayers might reasonably conclude after the judicial
smackdown recently delivered to a donor
who participated in a leveraged charitable donation program. In Maréchaux v.
Canada, [2009] T.C.J. No. 467 (aff’d
[2010] F.C.J. No. 1337), the donor, a real
estate lawyer, had claimed a donation tax
credit on a $100,000 cash gift made to a
registered charity. The Tax Court, in a
decision upheld by the Federal Court of
Appeal, denied him the credit because
most of the donation was financed by a
loan made to him on exceedingly favourable terms. The aspect of this decision
that surprised many observers is that
Maréchaux was not allowed a credit even
ADRIENNE
WOODYARD
&DAVID
NATHANSON
for the cash portion of the gift paid out of
his own pocket.
Maréchaux is not alone. Thousands of
Canadians who participated in similar
donation programs have been reassessed,
and were anxiously awaiting the outcome
of this case. Their hoped-for tax refunds
will never materialize.
Leveraged donation programs have
been very popular. They are often mar-
keted to accountants and financial advis-
ers, who are urged to recommend them to
their high-net-worth clients.
