Words and Phrases - "sell"

The Minister assessed the taxpayer to fully deny his charitable donation claim for his 2008 taxation year respecting his participation in a leveraged donation scheme (the “Scheme”). This assessment was made in reliance on s. 237.1(6.1), which prohibited a claim by a person in respect of a tax shelter where any person was liable to a penalty under s. 237.1(7.4) which was unpaid (here, four persons had been so assessed) and was made beyond the normal reassessment period in reliance on s. 237.1(6.2), which provided that otherwise statute-barred assessments could be made as necessary to give effect to s. 237.1(6.1). S. 237.1(7.4) provided that every person who, whether as principal or as agent, sells, issues or accepts consideration in respect of a tax shelter before the issuance of a tax shelter identification number (here, none was ever issued) is liable to a specified penalty.

Bodie J found that the Scheme was a tax shelter and, in particular, a gifting arrangement (as defined in s. 237.1(1)) for which the taxpayer incurred a “limited-recourse debt”, as determined under s. 143.2(6.1) given that Mr. Ciccone, who had introduced the taxpayer to the Scheme, told the taxpayer that by participating in the Scheme he would be issued a loan of $40,000 with no bona fide arrangements for repayment and that the amount of the loan would be used to make a charitable gift to the taxpayer’s church. However, although all of the four persons had been assessed for the s. 237.1(7.4) penalty, this did not establish that they were “liable” for such penalty, i.e., had fulfilled the requirements for its imposition.

In particular, although Mr. Ciccone may have promoted the Scheme, there was not real evidence of him (or the other three) “selling” anything, a word which should be “limited to a transfer or exchange for a price and should not encapsulate a meaning comparable to the word ‘promotes’” (para. 69). Furthermore, regarding the word “issue” (which was “meant to capture the distribution of an interest in favour of a participant, by a particular entity”) (para. 74), there was evidence of any of the four, as principal or agent, issuing something as part of the Scheme. Regarding the test of acceptance of consideration, even if the Crown had been able to demonstrate that the $40,000 alleged donation amount had actually flowed between the entities as alleged, it was unable to point to any specific acts performed by any of the four in accepting any monies as part of this alleged route of funds. Although Mr. Ciccone had received T4 earnings, the evidence did not demonstrate that this income was attributable to the Scheme.

As the Cown had not established that any of the four was liable to the s.237.1(7.4) penalty, the Minister had not been entitled to rely on s. 237.1(6.2) to reassess beyond the normal reassessment period.