On December 6, 2013, the Federal Court of Appeal handed the CRA yet another victory in an appeal brought by a donor to a charitable donation tax shelter in Kossow v. The Queen. The Court of appeal denied Ms. Kossow’s appeal against the Tax Court’s denial of her earlier appeal.
Ms. Kossow had participated in a charitable donation tax shelter involving obtaining a 20 year interest free loan from a third party that she combined with some of her own cash to make a contribution to a foundation. The foundation then made a grant with most of the proceeds to an art gallery that bought sculptures with its contribution. The Foundation then paid most of the remaining cash to the promoters of the tax shelter as a “fundraising fee”.
The Tax Court had determined that the interest free loan provided to Ms. Kossow was a benefit that vitiated her donation as a gift.
The Court of Appeal applied earlier decisions to confirm that an interest free loan clearly was a benefit. The Court also confirmed that the benefit provided to Ms. Kossow was still a benefit that vitiated the gift notwithstanding that it came from a third party.
The Kossow decision is consistent with the recent pattern of the courts denying appeals brought by tax shelter donors.