Duguay v. R. - TCC: Donation to charity in exchange for lower rent not a true gift

Duguay v. R. - TCC:  Donation to charity in exchange for lower rent not a true gift


Duguay v. The Queen (August 8, 2016 – 2016 TCC 168, Favreau J.).

Précis:   The appellant was living in an apartment owned by a registered charity.  He personaly paid for $20,000 in renovations to the apartment.  The charity gave him two cheques, each for $10,000 to reimburse his renovation costs.  He endorsed one of the cheques back to the charity for which he was issued a $10,000 donation receipt.  The receipt was disallowed and he appealed to the Tax Court.  The Court found that the taxpayer was paying less than market value rent for his apartment as a result of the renovations.  The Court dismissed his appeal on the basis that there was no true gift.  There was no order as to costs since this was an informal procedure appeal.

Decision:   The facts of this case are straight forward:

[5]             The facts in this case are not in dispute. More specifically, the respondent is not contesting that the materials purchased by the appellant in the amount of $20,153 were used exclusively to renovate his Manoir apartment. Moreover, the parties acknowledged that on November 18, 2013, the Manoir issued two cheques, each in the amount of $10,000, made out to the appellant to reimburse him for the construction materials and that, that same day, the appellant endorsed one of the two $10,000 cheques and returned it to the Manoir to be deposited, for which the Manoir issued the appellant a charitable donation receipt in the amount of $10,000.

[6]             The appellant testified at the hearing and explained that he had entered into an agreement with the former Manoir administration, under which the Manoir would reimburse the appellant for 50% of the cost of the work and issue him a charitable receipt for the remaining 50% of the cost of the work, to take into account the value of the materials that the appellant would have to leave behind should he vacate the premises.

The Court held that, on the evidence, there was no true gift:

[19]        In this case, at the time of the gift, the appellant was entitled to immediately enjoy the renovations made to his apartment, and that advantage was granted to him in relation to the gift made to the Manoir. Occupancy of the renovated apartment was not granted in isolation to the gift. The occupancy of the renovated apartment and the gift were inextricably linked through a prior verbal agreement with the Manoir made before the renovation work began.

[20]        It should also be noted that the appellant acknowledged at the hearing that the rent he paid to occupy his apartment was lower than the market value of rent required to live in that type of unit. Moreover, there was evidence that the rent paid by the appellant was even lower than the rent paid by the apartment’s previous tenant before the renovations were carried out.

[21]        Furthermore, contrary to what the appellant suggests, the concept of the advantage received in consideration of the gift must be analyzed based on the donor’s perspective, and not that of the donee. Therefore, it is not relevant to question whether the Manoir benefitted or will benefit from the gift in the future when the appellant vacates his apartment.

[22]        At the hearing, the respondent commented on the opportunity to divide the gift into an eligible part and a part ineligible for the charitable donation credit. Given that this point was not raised by the appellant and that no method was suggested to divide the alleged $10,000 charitable donation, under the circumstances of this case, there is no reason to share the gift or contribution for one part to qualify as a charitable donation.

There was no order as to costs since this was an informal procedure appeal.