http://decisions.fca-caf.gc.ca/site/fca-caf/decisions/en/item/64990/index.do 
Kossow v. Canada[1] (December 6, 2013) was a leveraged donation program where the underlying subject matter was art[2] to be acquired by a registered charity that was an art gallery:
How the Donation Program Worked
[5] The charitable donation program was promoted by Berkshire Funding Initiatives Limited and Talisker Funding Limited. Berkshire organized the fundraising program and Talisker provided loans to participants so they could make payments that it was hoped would entitle them to charitable donation tax credits. Talisker itself borrowed money from a Canadian lender in order to provide these loans and then borrowed from an offshore lender to repay the original Canadian lender. The program’s participants, including Ms. Kossow, would then combine their own cash with the proceeds of a loan from Talisker to make a payment to a registered charity, Ideas Canada Foundation. Ideas Canada Foundation was structured to flow money through to other charities, rather than carrying on its own charitable activities.
[6] Fully 88% of the total money paid to Ideas (the remainder covered fundraising fees and administrative costs) flowed through an escrow account with a law firm pursuant to a series of directions. The money was used to purchase art for the MacLaren Art Centre. MacLaren had no control over 87.5% of the money, receiving only 0.5% free of the direction of others. The art, and the price that the MacLaren would pay for the art, was decided upon by the promoters of the program and their associates. A considerable amount of evidence was led at trial with respect to the acquisition of these various art works and whether the prices paid for these works were reasonable and whether these transactions were in fact legitimate. It is unnecessary for the purposes of this appeal to summarize this evidence in any detail.
[7] It is fair to say that money transferred quickly between the promoters, companies, financial institutions, and charities in order to finance the program. The judge set out the complicated chain of transactions undertaken by the promoters as follows:
(a) The advances from Standard [the Canadian lender] were deposited to the bank account of Irwin Singer (“Singer”), in trust, who directed the TD Bank to credit the advances to the bank account of Talisker.
(b) Talisker directed the TD Bank to combine the advances from Standard with the amounts paid to it “as agent” and issue bank drafts to Ideas in the names of each of the Participants for 100% of their Donation. Talisker gave the TD Bank a list of the Participants’ names with the Donation made by each Participant.
(c) Ideas directed the TD Bank to deposit the proceeds of the bank drafts to its bank account. It then authorized the TD Bank to debit its account for 88% of the Donations and deliver a cheque or bank draft for this amount to Fasken on account of a gift to be made by Ideas to MacLaren.
(d) Ideas directed Fasken to deposit 88% (on some occasions 86%) of the Donations to an escrow account held in trust for the MacLaren. (Ideas paid Berkshire 11% of the Donations for its fundraising services. The remaining 1% of the Donations was used by Ideas to pay its expenses and salaries and to make donations to charities chosen by Sanderson [the Executive Director of the Ideas Foundation].)
(e) The MacLaren authorized and directed Fasken to pay all amounts received from Ideas, except 0.5%, to Jennings Art. The 0.5% was paid to the MacLaren for its building fund.
(f) Jennings Art directed Fasken to pay amounts to GSG. I assume that Jennings Art received a commission but the percentage was not put into evidence.
(g) GSG directed Fasken to pay “the amounts as may from time to time be requested” in writing by Wigmore Investments Limited (“Wigmore”).
(h) Wigmore directed Fasken to pay Talisker those amounts which Fasken had received on its behalf from GSG. According to the evidence, I conclude that GSG received at least 80% of the Donations and it directed that the Loan Amounts be paid to Wigmore who directed that they be paid to Talisker. Elizabeth Sumption in Barbados gave directions for both GSG and Wigmore. According to Beach, these amounts were Wigmore’s advances to Talisker under their loan agreement.
(i) Talisker directed Fasken to deposit the amounts received from Wigmore into Talisker’s bank account at the TD Bank.
(j) Talisker directed the TD Bank to credit 80% of the Donation (the Loan Amount) to the account of Irwin Singer in trust.
(paragraph 53, footnotes removed)
The court first turned to the application of the Federal Court of Appeal’s decision in Maréchaux[3] (which dealt with another leveraged donation program) to the facts:
[25] In my view, Maréchaux stands for two propositions, as follows:
(a) a long-term interest-free loan is a significant financial benefit to the lender; and
(b) a benefit received in return for making a gift will vitiate the gift, whether the benefit comes from the donee or another person.
[26] I turn now to the facts of this case and the application of these principles.
[27] It is evident from the facts of this case that several long-term interest-free loans formed part of the leveraged-donation programme entered into by Ms. Kossow. The judge found, and I agree, that
[t]he Appellant was able to transfer $50,000, $60,000 and $50,000 to Ideas by using only $17,000, $20,400 and $17,000 of her own money in 2000, 2001 and 2002 respectively. She accomplished this without having to pay interest on a commercial loan for the difference (paragraph 69).
[28] The result was that Ms. Kossow received a significant financial benefit as the recipient of a long-term, interest-free loans. That benefit did not come from the donee but from Talisker as a result of her participation in the donation program. The interest-free loan and the donation were two components of an arrangement consisting of a series of interconnected transactions, as illustrated by the chart set out in Appendix A to the reasons of the judge (reproduced above). Counsel for Ms. Kossow submitted that the chart did not accurately reflect all aspects of the program. However, in my view, the judge made no palpable and overriding error in finding as a fact that there was only one interconnected transaction in this case. Indeed, it appears to me that this was the only reasonable conclusion that was open to her given the evidence before her.
The court rejected the appellant’s contention that a recent decision of the Ontario Court of Appeal, McNamee v. McNamee[4], had changed the common law meaning of gift and called for a re-examination of Maréchaux:
[34] The Federal Court of Appeal in Maréchaux did not overlook a relevant statutory provision nor did it fail to follow a case that ought to have been followed. Given my conclusion with respect to the lack of conflict between Maréchaux and McNamee I agree with the Crown that there is no need to re-visit Maréchaux in light of McNamee.
The court also rejected the argument that the Tax Court judge’s reasons were inadequate:
Adequacy of Reasons
[36] Counsel for Ms. Kossow submitted that the judge’s reasons failed to meet the test set out in R. v. Sheppard, 2002 SCC 26 at paragraph 55, in that they were neither transparent nor accessible and precluded meaningful appellate review. I find no merit in this submission. The judge’s findings of the relatively few facts material to the question of law on which this appeal turns are both comprehensible and complete. She was not obliged to set out every item of evidence on which she relied nor explain in detail why she ejected any evidence to the contrary.
In addition the court rejected an argument that the Tax Court judge erroneously relied upon a few pages of material that had not been introduced into evidence:
[40] In my view, Oberreiter does not compel a retrial of this matter. The judge made no reference to those documents in her decision. Nor is there any basis for rebutting the presumption that the judge knew the law, or for concluding that she had “forgotten” that she had ruled during the course of the trial that these documents were not to be admitted as evidence. A review of the documents indicates that they were inconsequential to the findings of fact made by the judge that are material to this appeal. Hence, there is no merit in Ms. Kossow’s argument that she was prejudiced or that a reasonable person, informed of the facts, would conclude that she had been denied procedural fairness.
In light of the foregoing conclusions the court decided that it was unnecessary to comment on the GAAR allegations raised by the Crown and declined to do so (para. [41]).
The appeal was dismissed with costs.
[1] 2013 FCA 283.
[2] While the Federal Court of Appeal does not mention the subject matter of the program it was 612 Rodin sculptures. The Tax Court judge provides the following description (2012 TCC 325):
[28] According to this component of the Program, 88% of the Donations to Ideas were deposited into an escrow account held by Fasken on account of a gift which Ideas wanted to make to the MacLaren. However, the MacLaren had no control over 87.5% of those funds. They had to be used to purchase art which the dealers made available to the MacLaren at a price which the dealers dictated.
[29] On a review of the evidence, I have concluded that Hett was the person who planned the art component of the Berkshire Program. Sometime prior to October 4, 2000, she agreed to help William Moore raise funds for the MacLaren through Ideas. They intended that the MacLaren would acquire an inventory of Rodin bronzes which it could sell over a period of years to raise money. The MacLaren wanted to build a project called Art City in the city of Barrie, Ontario.
[30] Hett negotiated an agreement with Gary Snell, owner of Gruppo Mondiale (“Gruppo”), that Gruppo would manufacture, in Italy, 12 sets of Rodin bronzes for the MacLaren. Each set was to contain 51 bronzes for a total of 612 bronzes. These were called the MacLaren Edition. Hett negotiated that the MacLaren Edition would be sold to JKFA for US $6,000,000.
[31] Within a two day period, there were four contracts which were signed with respect to the MacLaren Edition of the Rodin bronzes. In the space of these two days, the price for the bronzes increased 18 fold from US $6,000,000 to US $108,840,000.
[Footnotes omitted]
[3] 2010 FCA 287.
[4] 2011 ONCA 533.