FEDERAL INCOME TAX - Expenses - Gifts  

Appeal by Yellow Point from a Tax Court decision confirming its 2014 assessment denying an ecological gift deduction claimed by the appellant. In 2008 the appellant, a corporation owning lands in their natural state, gifted lands to The Land Conservancy of British Columbia (TLC) and Nanaimo & Area Land Trust Society (NALT). The interests in the lands were transferred to TLC and NALT in 2008. At the end of its 2008 taxation year, the appellant did not have the documents establishing that an ecological gift had been made for purposes of s. 110.1(1)(d) of the Income Tax Act and did not claim the tax relief associated with the gift in its 2008 tax return. During its 2009 taxation year, the appellant received the fair market value certificate and the certification that the gifted land was ecologically sensitive. The appellant later received tax receipts from TLC and NALT. In 2010, the appellant provided these documents to the Minister and requested that its 2008 taxation year be reassessed to recognize its ecological gift and claimed a capital gains exemption in relation to the gifted property. The Minister reassessed the appellant’s 2008 taxation year. The appellant subsequently claimed yearly deductions with respect to the gifted property for its 2009 through 2013 taxation years respectively. The Minister disallowed the ecological gift deduction for 2014 on the basis that the five-year carry forward period available for the claimed deduction expired in 2013. The appellant argued that s. 110.1(1)(d) introduced into the Act a novel concept of a gift which did not materialize until all the requirements for claiming the tax relief associated with the gift were met, in this instance, 2009. The Tax Court judge held according to the wording of s. 110.1(1)(d), the gift was made when the appellant granted the covenant to TLC and NALT in 2008 and that the other requirements set out in s. 110.1(1)(d) for claiming the tax relief were not part of the determination of when a gift was made. The appellant argued that a purposive analysis of s. 110.1(1)(d) showed that the gift was not made until the subsequent year when the required certificates and the appropriate receipts were filed with the Minister.

HELD: Appeal dismissed. The Tax Court judge properly held that the ecological gift was made in 2008 when the gifted property was disposed of, rather than in the following year when the prerequisites for the associated tax relief were met. The question as to when a gift was made and when a gift qualified for a deduction or an exemption under the Act were distinct questions. The appellant could not at once maintain that the ecological gift was made in 2008 for purposes of claiming the capital gain exemption and in 2009 for purposes of claiming the related deduction, because both forms of relief flowed from the same gift. There was no doubt that the appellant’s entitlement to the capital gain exemption and the related deduction did not arise until 2009 when all the conditions set out in paragraph 110.1(1)(d) were met, but this did not alter the time when the gift was made. The Tax Court judge was correct when he held that the existing process ensured that a taxpayer could claim a deduction in the year in which the gift was made and the subsequent five taxation years, even if there were delays in the final determination of the fair market value of the gifted property.

Yellow Point Lodge Ltd. v. Canada, [2020] F.C.J. No. 1085, Federal Court of Appeal, M. Noël C.J. and D.W. Stratas and R. LeBlanc JJ.A., November 10, 2020. Digest No. TLD-December142020004