Executive Summary: Key Legal and Evidentiary Issues

• Participation in the GLGI Program was deemed a single, interconnected scheme lacking genuine charitable purpose

• Cash payments were found not to constitute “gifts” under the Income Tax Act due to the donors’ intent to profit

• Taxpayers admitted they expected to receive more value than they contributed, nullifying donative intent

• Subsections 248(30)–(32) of the Act were ruled inapplicable absent donative intent

• Receipt of tax slips was insufficient to prove valid charitable gifts when overall intent showed anticipation of benefit

• Prior cases on similar gifting arrangements were affirmed, further weakening the appellants' arguments

Facts and outcome of the case

Background of the dispute

Chris Walby and Joel De Las Alas appealed decisions of the Tax Court of Canada that denied them charitable donation tax credits claimed under the Income Tax Act. Both had participated in the Global Learning Gifting Initiative (GLGI) Program. This scheme involved donating cash to a registered charity and then receiving courseware licenses, which were also purportedly donated, in exchange for inflated charitable tax receipts. The appellants claimed donation credits for both the cash and in-kind portions. However, they later conceded that the licenses were worthless and that those tax credits were rightfully disallowed.

Proceedings before the Tax Court

The Tax Court dismissed their appeals after finding that the GLGI Program was a single, interconnected transaction designed to produce profit for the participants through inflated tax credits. The court held that there was no donative intent—an essential element for establishing a valid “gift” under section 118.1 of the Income Tax Act. The appellants’ expectation to receive greater financial benefits than the amount contributed undermined the authenticity of the gifts.

Legal issues on appeal

The Federal Court of Appeal was asked to consider whether:

1. The Tax Court erred in treating the series of transactions as interconnected rather than separately assessing the cash donation.

2. A valid gift exists if a donor does not actually receive a benefit, even though one was anticipated.

3. The Tax Court misinterpreted the term “value” in subsection 248(30) of the Act.

The appellants attempted to isolate the cash payments from the rest of the scheme and argued they should still qualify for a tax credit. They also invoked a prior Tax Court case, Morrison, where a cash gift was upheld despite a related program failure.

Federal Court of Appeal’s decision

The Court rejected all grounds of appeal. It reaffirmed that donative intent must be present for a contribution to be considered a gift. The judges emphasized that the appellants expected to benefit from their involvement and only contributed cash with the aim of securing larger tax returns. The receipts alone were insufficient proof of a gift when considered against the broader context.

Regarding the interpretation of “value” under subsection 248(30), the Court dismissed the notion that subjective expectations of value should be considered. It held that “value” must be interpreted as the objective monetary worth, not the donor’s perception.

Conclusion

The Federal Court of Appeal upheld the Tax Court’s decision, confirming that the cash payments were not valid charitable gifts due to the lack of donative intent. The appeals were dismissed, and costs of $8,000 were awarded to the Crown. The decision solidifies a consistent judicial approach to similar tax shelter schemes, underscoring that anticipated personal benefit is incompatible with the notion of a charitable gift.