Dentons

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David: charitable tax credit allowed for amounts paid for inflated donation receipts

By Simi Dosanjh

Where a taxpayer receives an inflated donation receipt, may the taxpayer claim a charitable donation credit for the cash amount of the gift?

According to the Tax Court of Canada in David v The Queen (2014 TCC 117), in the absence of any extraordinary circumstances, the answer to that question will be yes.

In David, the taxpayers paid certain amounts to a tax return preparer as cash donations to a registered charity. In exchange, the taxpayers received donation receipts from the charity in amounts the minister claimed were 10 times greater than their cash donations. The taxpayers subsequently claimed charitable donation tax credits under subsection 118.1(3) of the Income Tax Act (Canada) based on the inflated donation receipts…

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